UK ad spend hits £36.6bn in 2023 amid real terms contraction

While the UK’s ad market grew 6% in 2023, total growth when discounting high inflation rates was -1.2%, according to the latest report from the AA and WARC. 

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The UK advertising market grew 6% to £36.6bn in 2023, according to new figures from the Advertising Association (AA) and WARC

However, when taking into account high inflation, the real terms figure represents a 1.2% contraction in spend, according to the latest AA and WARC Expenditure Report. This puts advertising spend behind the UK’s overall economic growth of 0.1%. 

AA and WARC now forecast ad spend to rise 5.8% in 2024 to £38.8bn, a 0.1 percentage point downgrade on January’s forecast, which it attributes to prolonged inflationary pressures. By 2025, the UK’s ad market is expected to be worth more than £40bn.

Included in the forecast is the prediction TV and radio will grow 2.6% and 2.3%, respectively, in a return to growth. Spend on cinema advertising is also expected to grow by 2.5%. Events this year, such as the men’s UEFA Euros tournament in the summer and a looming General Election, are expected to contribute to healthy growth. 

Widespread decline

The vast majority (78.4%) of the UK’s ad spend was spent on online formats, which rose 11% last year to a total of £28.7bn. Out-of-home was the only other channel to record growth in 2023, increasing by 9.7%. 

Reductions across channels were deep, including direct mail (-12.6%), national newsbrands (-6.3%), radio (-3.3%), magazine brands (-9.1%), regional newsbrands (-10.1%) and cinema (-4.2%)

TV also recorded a drop in ad spend of 8.9%, however, BVOD grew by 15.9%, lessening the decline. 

On a sector specific level, retail (5%) and services (4.7%) were the only sectors to increase ad spend – excluding search and classified formats.

Ad spend growth set to exceed expectations

Last year’s golden quarter – the last three months of the year – recorded growth of 7.4% year-on-year to hit £9.7bn, led by digital out-of-home (up 18.1%), BVOD (up 15.9%) and search (up 12.9%). 

“The continued shift to online advertising formats reflects the changing shape of our economy, with people increasingly shopping online as well as on the high street, and businesses striving to provide the best customer experience in all scenarios,” says AA chief executive Stephen Woodford.

“The UK advertising industry is much respected around the world, which is why we continue to see the exports of UK advertising services grow, an important source of additional revenue for many advertising businesses in a domestic economy that has little-to-no growth.”