The Advertising Association and WARC today released their Expenditure Report, assessing the rate of ad spend in the UK. According to the report, UK ad spend reached £9 billion in Q1 2023. Spend was flat for the quarter, with 0.1 percent YoY growth.
But the firms narrowly improved their outlook for ad spend in 2023, forecasting 2.6 percent YoY growth for the full year, reaching a total £35.7 billion. While the report acknowledges the growth is “minimal”, it marks a 2.1 percent increase on the forecast issued in April.
In 2024 the ad market is forecast to grow 4 percent YoY, reaching £37.1 billion, representing a 1.3 percent downgrade from the April forecast. The report notes that the “muted outlook” reflects inflationary pressures on UK businesses and families, with the market set to contract -4.3 percent in 2023 in real terms.
Back of the net
Though overall ad spend was flat in Q1, a few sectors saw growth during the first three months of 2023. Broadcaster video-on-demand (BVOD) spend was up 18.7 percent, offsetting a “challenging quarter” for the broadcast sector. While that growth can partially be attributed to linear budgets being reassigned to streaming, BVOD’s targeting and measurement capabilities also appear to be attracting new advertisers.
That said, the total TV market was down for the first half of the year, with commercial broadcasters taking a hit to their ad revenues. But the AA and WARC have forecast mild gains in ad spend for Q3, driven by the FIFA Women’s World Cup and Para Athletics World Championships. “TV spot and sponsorship as well as radio and out of home are expected to see ad spend growth,” notes the report.
And Q4 is also set to benefit from Christmas spending, resulting in 3.7 percent YoY growth – though this is compared to a relatively soft Q4 last year. Looking ahead to 2024, advertisers are expected to return to TV as trading conditions become more favourable, and BVOD continues to grow.
The Barbenheimer Effect
Other standouts from the Q1 results included search (+5.1 percent) and online display (+3.6 percent), which returned to growth in the first three months of the year. Together they accounted for 76.2 percent of all ad spend during the quarter, according to the research. Search and online display will continue to account for 76.7 percent of spend for the full year, rising to 77.6 percent in 2024.
Meanwhile cinema is projected to record 20.8 YoY growth in 2023, as the unlikely double-bill of Barbie and Oppenheimer drives ad spend this summer.
“This latest forecast indicates a slight improvement in outlook in terms of growth of spend, with the improvements in online forecasts being notable,” said Stephen Woodford, CEO of the Advertising Association. “However, with high inflation continuing to depress consumer and business confidence we may end up seeing a real-terms contraction of nearly 4.3 percent in 2023 for UK advertising investment.”
“With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry,” added James McDonald, Director of Data, Intelligence & Forecasting at WARC. “That said, a welcome return to growth in key online sectors during the first quarter has been cause for an upgrade to our full year projections, with a forecast rise of 2.6 percent demonstrative of more favourable trading conditions in the second half of the year.”
