UK ad spend will hit a wall in 2022 and shrink in 2023
The UK ad market is expected to slump in 2022, according to the Advertising Association (AA) and Warc’s Q2 ad spend report, which forecasted a meager 1.8% growth compared to the pre-Covid average of 2.6%.
The latest quarterly AA/Warc adspend report signals a slowdown in ad investment / Pexels
As a result of rising costs and the geopolitical crisis in Ukraine, the outlook for 2023 also shows UK advertising investment could contract by nearly 1%. 2022 is a year of two halves, with Q1 ad spend up 28.3% year-on-year, reaching a total of £8.6bn – 7.7 points above the AA/Warc’s April predictions. But as recession looms and inflation is on course to hit double digits, the following three-quarters of 2022 drag ad spend down to a mere 10.9%.
The report suggested that the UK ad market is “liable to see further headwinds on the horizon.” Its latest data has forecasted for 2023 to grow by 4.4% to a value of £37bn, a 1.0pp downgrade from its April predictions.
James McDonald, director of data, intelligence and forecasting at Warc, said inflation is now “starting to bite” and, for advertisers, “higher costs will carve into margins.” The findings come after S4 Capital boss Sir Martin Sorrell issued a profit warning to investors as its operating costs threaten to rise beyond incoming revenue.
There were some major media winners in Q1, with investment in out-of-home (OOH) skyrocketing by 146.2% year-on-year, although the sector is expected to level out by the end of the year to 28.9%.
TV and ad-supported VOD also helped drive Q1’s bumper figures, with cumulative spend up 45% year-on-year – but again TV spend in the second half of the year will half to 26%. The decline in spend is likely a result of a cooling down of inflation for TV ad slots.
Online advertising is expected to stay consistent across the year, accounting for 74.3% of all ad spend in 2022 – marginally up on 2021’s 73.5%.
“It is encouraging to see growth in our industry over Q1, as the economy continues its recovery year-on-year following last year’s Covid-19 lockdown,” said Stephen Woodford, chief executive officer of the AA. “However, the pressures of inflation on living standards and economic growth are at the top of everyone’s mind.”