UK advertising spend only grew 1% in first half of 2023 as country ‘skirts’ recession

Lower consumer spending and private sector investment were the primary reasons behind the low growth, according to James McDonald, director of data, intelligence and forecasting at Warc.

“The UK’s economy continues to skirt with recession as households make cutbacks in the face of stubbornly high inflation and unemployment slowly ticks upwards,” he said.

The figures describe a hard first half of the year for the UK marketing sector. Ad spend grew 8.8% in 2022, but the first quarter of the year saw growth of just 0.5%.

Spending on TV, national and regional newsbrands, radio, cinema and direct mail all fell, while spend on digital channels – search, online display, digital radio, digital out-of-home – all rose. 80% of advertising spending in the UK went to a digital channel, the study found.

Dominic Charles, managing director of audience intelligence and marketing science at media agency Wavemaker UK, said: “Digital ‘performance’ channels are contributing significantly to the spend growth at the expense of more traditional ‘brand’ channels. This is not surprising as the challenging economic situation we find ourselves in will naturally increase the pressure on delivering returns back to the business quickly.”

Approximately £17.5bn was spent collectively on advertising between January and June, with an of £35.6bn for the entire year forecasted. GDP growth during the same period was 0.6%, according to the Office for National Statistics (ONS). The UK is the world’s fourth-largest advertising market, after the US, China and Japan.

Charles added: “While better than anticipated growth in overall advertising spend is an encouraging sign, these figures still paint a picture of caution in how advertisers are prioritizing their investment. While it’s tempting in times like this to dust off the 2008 playbook to prove this is ultimately not effective long-term, there’s a more fundamental problem – even if the goal is short-term sales, we’re not necessarily doing that right either.

“Channels like TV, radio and newsbrands have been proven to be as, if not more, effective at driving ‘performance’ as digital channels and have the advantage of creating significantly stronger long-term effects to boot.”

Hannah Kimuyu, managing director of performance at Brave Bison, suggested that “many industry folks may look at this quarter’s figures and forecasts as relatively minor growth, but there is a much more positive picture if you read between the lines. This is the market stabilizing after a lot of uncertainty.”

Despite predictions of a 2024 nationwide recession and a real-term fall in advertising spend from the IPA’s latest Bellwether report – an alternative forecast that relies principally on a survey of marketers – the AA/Warc study suggests advertising spending will increase 3.9% to around £37bn next year.

Though overall spending is expected to tick upward, McDonald said that publishers and broadcasters were not likely to benefit. “It is encouraging that… the market is on course to be 2.6% larger this year overall. It should, however, be noted that this growth is concentrated in certain corners of the industry, with broadcasters and publishers bearing the brunt of an unfavorable trading climate while digitally native platforms largely prosper,” he commented.