Stephen Woodford: Putting advertising at the heart of the recovery
Stephen Woodford, chief executive officer of the Advertising Association and chair at Livity, offers his response to chancellor Rishi Sunak‘s latest raft of economic recovery measures.
/ Photo by Tai's Captures on Unsplash
The chancellor of the exchequer today announced a raft of measures to kick start the recovery from Covid-19 and if one thing is clear in his plans, Mr Sunak clearly believes that consumers will be at the heart of our country’s economic revival. This news would come as no surprise to those of us in the advertising and marketing industries. In 2019, consumer spending accounted for two thirds of UK GDP. But, like all parts of the economy, Covid-19 has affected our industry through a combination both of decreasing consumer confidence and the closure of large parts of the economy.
I might be biased, but if the chancellor is looking for an answer to boost spending, he should take a closer look at the UK’s advertising industry. Advertising and marketing lies at the very heart of informing people about the products and services available to them as businesses return to normality. In research we conducted with Deloitte, the Advertising Association demonstrated that each £1 spent on advertising delivers £6 for the UK economy. That amounted to a contribution of over £152bn in 2019. As the economic fightback from Covid-19 continues brands will need to invest in advertising to reach consumers and the government should in turn support advertising to get this virtuous circle spinning.
The proposals announced today will hopefully mean benefits for us all, the temporary cut to VAT on food, accommodation, and attractions from 20% to 5% should help to kickstart the travel and tourism industries. These sectors have been virtually absent from the advertising market in recent months, but they rely on our industry to reach their audience. The ‘Eat out to help out‘ voucher scheme to give diners 50% off meals should similarly boost the hospitality sector, another industry that relies heavily on advertising to market its products and services.
The increase in the stamp duty threshold to £500,000 will surely give a fillip to the housing market and unlock sales and purchases on properties, a move which may well mean a boost to brands in the DIY, home and furnishing markets. Plans for the new scheme to create thousands of job placements for young people, and the green homes grant to make homes more energy efficient, will also be welcomed across industry. Climate action, and issues surrounding diversity and inclusion, remain hugely important to our industry and the impact of Covid-19 should not be allowed to impede the progress that we hoping to make in ensuring our industry is greener and more open to the rich seam of talent we see in communities right across the UK.
But against these positive moves, the future remains uncertain. Our recent AA/Warc Expenditure Report projections on ad spend showed we’re expecting a fall in the advertising market of 16.7% over 2020. So the measures announced today, while they are welcome, may well just be making up for potential losses rather than building on solid foundations. Coupled with this, there has been speculation in the media that the government could possibly extend advertising restrictions on high fat, salt and sugar advertising as a way of cutting obesity levels in the wake of Covid-19. While this plan is not yet confirmed and government aims to reduce obesity are well-intentioned, the UK already has some of the strictest rules on advertising in the world and the fact that brands, and the wider ad industry, have just come through the most economically calamitous three months any of us can remember means additional commercial pressures at this time would be unfortunate to say the least.
Looking ahead, I am sure that the chancellor has looked covetously on the record amounts that British people have been putting into their bank accounts recently as their wariness encourages them to save. According to the Bank of England, these deposits have increased by record amounts in recent months, including £14.3bn in March, £16.7bn in April and no less than £25.6bn in May. Unlocking some of these savings must be something the Treasury will be aiming for given the welcome the boost to the economy it would bring. A combination of increased confidence and spending by consumers along with today’s announcement could well be the shot in the arm that the advertising industry has been looking for. Advertising and marketing by brands will be at the heart of the economic recovery and, while clouds remain on the horizon, we hope that all these measures will help the parts of our sector affected by the outbreak to return to growth. We stand ready to work with government in supporting the country’s economic resurgence.