Recession in the UK Advertising Industry: Do we need to worry yet?

While the value of the UK ad market is expected to reach £36.1 billion in 2023, according to the recently released expenditure report by the Advertising Association, this figure represents a decline of 3.0 percent when accounting for inflation.

This poses a challenge for both the industry, which must manage its cost base accordingly, and clients, who are wrestling with the age-old dilemma of cutting spend or maintaining, or even increasing, share of voice.

What do industry leaders think about it? How worried should we be, and what can be done to mitigate this real-term decline?

Andrew Stephens, CEO, Goodstuff

We've got this.

After nearly 3 years of unprecedented macro global challenges, I think the advertising and media industry is far better prepared for what we hope is a less tumultuous year.

Whilst headline growth forecasts of 4 per cent are hardly anything to write home about, there is at least growth (if you exclude inflation…), and the IPA Bellwether survey suggests a net 24 per cent of clients are adjusting budgets up. Certainly, in our conversations with clients, there is an attitudinal shift to once again look at the optimal balance between short and long-term brand investment and a greater appetite for bold and brave work again. New business is also particularly buoyant again.

We spent the majority of 2022 in transformation mode so we could come out in 2023 in tip-top condition for the challenges ahead. We will soon relaunch the Goodstuff brand, launch new products and services, announce a management restructure and overall, refresh how we enable Goodstuffers to create the best work of their life.

Karen Martin, CEO, BBH

Agencies have shown we can adapt and even reinvent ways of working in order to succeed through the most challenging times, and that agility will continue to be critical going forward.  

But more than ever before, clients need agencies to champion creativity. It is and will always be the answer.

After such a prolonged period of uncertainty, and with a recession looming, our job is to turn the rapid shifts in consumer behavior and the economic landscape into growth opportunities for our clients.

This means we’ve got to be even more proactive and deliver the most ambitious, ground-breaking ideas that can transform businesses, boost growth and build brands.

Matt Holt, CSO, Digitas UK

We may be answering the wrong question here. Instead of arming themselves to mitigate any downturn, agencies need to use their creativity to mitigate uncertainty. There are differing predictions about the extent of the downturn but what’s in no doubt is that uncertainty is here to stay. Consumer behaviour is still adjusting after the pandemic.

Geopolitical instability is making it incredibly hard to predict the future economy. AI is starting to ask serious questions of who we are as people and as employees.

So agencies need to develop the mindset and tools to help manage uncertainty – for themselves and for clients. For instance, how can we better understand consumer – and employee - behaviour? How might AI help us to make better business decisions for our agencies and clients? 

Adjusting to a new era of uncertainty is challenging but if agencies get it right, an exciting new era of creativity beckons. As digital agencies, we have always had to brace ourselves and lead our clients into uncertain frontiers as consumers and technology evolve, so we continue to be ready and excited for what the future holds. As Nobel prize winner, Ilya Prigogine observed, “The future is uncertain, but this uncertainty is at the very heart of human creativity”.

Sid McGrath, CSO, Wunderman Thompson

We’re hearing lots of contradictory predictions about the economy and ad spend over the next year and I’m not going to add to the confusion. Suffice to say that brands must prepare for uncertainty in the age of permacrisis.

Try thinking like a retailer so instead of relying on annual planning, use three-month advertising bursts to adapt to whatever happens next. Stay true to what brands offer people in an era of chaos – meaning in their lives. Offer a sense of control with simple solutions to their challenges, demonstrate compassion and help people create connections. Take care when cutting back on marketing spend in different channels. People will pay more for strong brands than weak ones, so don’t just shift spend into the sales phase. Stay agile and be on the alert for new competitors, as they often launch during a downturn. And never stop building your brand.

Karla Smith, CFO, Ogilvy UK

Hire, don’t hire. Invest for growth or hunker down. These are the questions running through all agency leaders heads. How do we ensure our agencies are agile enough to weather any potential storms? You would have thought that having survived the downturn during Covid we’d all be practiced at this, and we are, but that doesn’t mean it we can breeze through. Balancing the revenue, resource and investing for growth is a constant challenge for all leaders. Through uncertainty and potential recessions – however short lived - leaders may feel that the tightrope they balance on is getting more unstable.

So what do we need to do? Firstly ensure we have trusted relationships with our clients and are demonstrating how we can help them through uncertainty. Secondly, ensure we have an agile workforce which can flex if outlooks change. Thirdly, communicate openly with our people about the challenges we face and how we are approaching them. Working through this together with open honest relationships with our clients and our people is the key to weathering any potential storm.