Growth in advertising spend is set to stall this year, as cautious brands pull back on activity in wake of rising costs and continued uncertainty, according to the latest forecast from the Advertising Association (AA) and WARC.
UK ad spend is expected to grow by just 0.5% in 2023. The AA/WARC forecast is a significant downgrade on their previous prediction that spending would grow 3.8% this year, made in January.
Online classified and direct mail are among many channels expected to see declines. The former will see the steepest decline of any category at 7.5%, while direct mail will drop 6%.
Elsewhere, national newsbrands (-5.2%), regional newsbrands (-5.8%) and magazine brands (-3.2%) are tipped to decline and at faster rates than in 2022.
In 2023, cinema will again be the category which sees the strongest growth, at 37.2%, followed by digital out-of-home at 6%.
The sluggish start to the year follows confirmation of a 5.8% drop between October and December 2022. This is the first time ad spend has fallen in the final quarter of the year since 2009, when the UK was emerging from five consecutive quarters of recession following the financial crash.
“These figures reflect the broader macro-economic environment, with a cautious outlook as the UK economy narrowly avoids recession, but shows very little signs of real growth,” says AA chief executive Stephen Woodford.
The last quarter of 2022 saw the ad spend market decline in the UK; however, it did grow by 8.8% throughout the whole of the year.
The growth in ad spend last year came predominantly from the first half of the year, when it grew by 26%. Cinema and out-of-home advertising saw the strongest growth last year at 123% and 31.1% respectively, as these categories recovered post-pandemic.
Ad spend on TV as a whole declined last year by 1.4%; however, the broadcaster video on demand (BVOD) subcomponent of TV saw strong growth of 15.4%.
National newsbrands, regional newsbrands and magazines all declined, with national newsbrands seeing the steepest decline of 2.2%.
While the UK is the third-biggest advertising market in the world, worth an estimated £34.8bn in 2022, it is projected to have the slowest rate of growth out of the top ten largest markets in 2023.
AA chair Annette King called on the UK government to create “a strong plan for growth” to allow the advertising industry to live up to its potential.
“At the same time, we need to address the talent shortages faced by our industry – for example, working with Government to increase flexibility in apprenticeships, and answering the demand for digital skills and expertise which will equip our workforce for the future,” she said.
In separate research from Nielsen, over two-thirds (69%) of marketers globally say economic conditions had “an extreme or significant impact” on their planning for this year. However, there appears to be a disparity between the predictions for UK ad spend in 2023, and global marketers’ outlooks, with 64% of those surveyed by Nielsen expecting their budgets to increase this year.
Indeed, the latest IPA Bellwether survey released last week found that a net balance of 8.2% of businesses upwardly revised their marketing budgets in the first quarter of the year. However, sales promotions led the budget growth last quarter at 8.8%, with main media spend seeing more modest growth of 5.8%.
The AA and WARC Expenditure Report does forecast UK ad spend will grow quicker in 2024; however, this growth will still be below 2022 levels as well as its long-term average at 3.9%.