Despite Economic Turmoil, UK Marketers' Spend Still Set to Grow This Year

Despite expectations of an economic recession, the U.K. advertising sector is showing durability, and marketers in the country intend to continue their spend on advertising. In fact, the market is predicted to grow by 3.8% this year. According to the latest Advertising Association/WARC Expenditure Report, the total spend by brands in the U.K. is expected to total $44.4 billion (36.1 billion pounds) this year. This follows an estimated increase of 8.8% in 2022 to reach $42.7 billion (34.7 billion pounds). The projection for 2023 is in line with the previous forecast made last October, but following a record rise in inflation since then, this will equate to a 3% real terms decline. It is also expected that growth across all advertising sectors will decrease. The report is compiled using a forecasting model on a two-year basis, which takes account of the strength of U.K. market value with its gross domestic product data that accounts for two-thirds of the change in ad spend, it claims. It is also adjusted for short-term factors, including changes in spend around major events such as the Olympic Games or the FIFA World Cup. The latest AA/Warc Expenditure report follows the release of the Q4 IPA Bellwether Report, which also portrayed continued confidence among marketers, revealing that budgets for the final three months of 2022 found marketing spend to have risen by a net balance of 2.2%. Despite an air of resilience in recent market results, a looming recession will put pressure on ad trade this year.James McDonald, director of data, intelligence and forecasting for WARC According to AA/Warc, ad spend increased by 4.3% to a total of $10.5 billion (8.5 billion pounds) between July and September last year. This was the ninth consecutive quarter of growth. James McDonald, director of data, intelligence and forecasting for WARC, said that with the U.K. having “narrowly avoided” entering into recession last year when the economy grew by an unexpected 0.1% in November, a downturn “now seems unavoidable” this year. “Despite an air of resilience in recent market results, a looming recession will put pressure on ad trade this year. We foresee ad market growth easing to 3.8%, equating to real terms decline and the weakest rise in a decade if the pandemic-hit 2020 were excluded," he added. "The silver lining here is that our current modeling suggests that the slump will be short-lived, with advertising investment set to lift by 5% over the first nine months of 2024." How Marketers Are Rebalancing Ad Spend Budgets in 2023 The trend of focusing on digital channels continued to remain true. The first nine months of 2022 saw spend grow by 10.8% last year to $31.1 billion (25.3 billion pounds). Search rose by 7.7% during Q3 alone to account for 40% of total ad spend, while social media grew by 4.4% and broadcast video on demand by 4.3%. Stephen Woodford, CEO of the Advertising Association, highlighted the impact of high inflation and the “significant headwinds” on the wider economy and media costs, stating the expectation that ad spend would likely be “flat” as a result. “These pressures all contribute to slower growth projections for the year ahead,” he added. “Advertising plays a vital role in helping brands communicate with their customers and navigate the cost-of-living pressures that everyone faces.”