UK's record £5bn ad spend in Q1 buoys AA/Warc's positive growth predictions for 2016

Brexit

UK advertising expenditure is forecast to post 4.2 per cent growth in 2016 and 3.8 per cent growth in 2017, according to the Advertising Association/ Warc Expenditure. It brings some good news to marketers following the recent IPA Bellwether report which downgraded ad spend predictions in light of the UK’s decision to leave the European Union.

The Advertising Association (AA) noted a strong start to the year, where in the first quarter of 2016 (before the Brexit vote) advertising expenditure rose 4.3 per cent to reach £5.7bn – the first time spend has passed £5bn in a first quarter.

However, economic factors of Brexit have undoubtedly been at play and overall figures have been revised down slightly since April (-1.3 percentage points for 2016 and -1.7 percentage points for 2017).

But, the report largely pointed to the downward revisions for newsbrands and direct mail, the UK’s third and fourth largest media channels.

National newsbrands fared the worst as print and digital adspend both fell by 16.9 per cent and 1.1 per cent respectively year on year. The drop led to a forecast for total national newsbrand spend to decline 10.1 per cent in 2016 and 10.8 per cent in 2017.

It was a similar story for regional newsbrands where adspend declined 11.3 per cent in Q1 and leading the AA/Warc to predict an overall decline of 9.7 per cent for 2016, with a further 8.5 per cent fall forecast next year.

Magazine brands saw adspend dip four per cent to £207m in Q1, with total magazine brands adspend forecast to decline 5.9 per cent in 2016 and seven per cent in 2017.

Finally, direct mail adspend data from the Royal Mail shows a 13.3 per cent decline in Q1 to £424m. A decline of 7.2 per cent is forecast for 2016 as a whole, with the rate of decline easing to -5.0 per cent in 2017.

However, simultaneously internet spend forecasts have been revised upwards by 0.8 percentage points to 12.3 per cent in 2016, while mobile advertising is predicted to increase 39.3 per cent in the same period.

Internet (including mobile) adspend is estimated to have grown 15.3 per cent in Q1 to reach £2.34bn – the 11th consecutive period of quarterly growth. Mobile is believed to have accounted for some 96 per cent of total internet growth, as spend rose 55.9 per cent this year to an estimated £830m during Q1 2016.

Full-year internet adspend growth is forecast to be 12.3 per cent in 2016 and a further 10.1 per cent in 2017.

TV, radio and out of home also experienced growth in the first quarter leading the AA/Warc to anticipate continued growth across the mediums in 2016/17.

“These numbers suggest that, despite uncertainty, our sector is resilient,” said Tim Lefroy, chief executive at the Advertising Association.

It makes for positive reading after the IPA Bellwether report – which is survey based – painted a less optimistic picture last month. For the first time since 2013, it predicted a fall in adspend and significantly downgraded its forecasts for 2017 as a direct result of the wavering confidence and wider uncertainty caused by the UK’s decision to leave the EU.

It was reflective of the views from a number of marketers The Drum spoke to, who said that clients were beginning to pause or pull ad spend.

Whilst the AA has been bullish on the sector’s performance post-Brexit, Lefroy added that the government has to “underpin that by taking every step possible to build advertiser confidence, promote the UK as a global advertising hub and ensure we remain open to the world’s best advertising talent.”

That job will fall on recently appointed secretary of state for culture, media and sport – Karen Bradley – secretary of state of a newly-created ministry of business, energy and industrial strategy, Greg Clark.

The Advertising Association said that it would be looking to make sure Bradley is up to speed on the biggest issues the industry is facing and why – given the £84.1bn a year contribution to the UK economy – she needs to make sure that advertiser confidence post-Brexit is a priority for the government as a whole.

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