UK Ad Spend Remains Flat in Q1, but 2023 Outlook Shows Hopeful Uplift

The latest AA/WARC Expenditure Report data represent a stable first quarter for the UK advertising industry in 2023, with spend remaining flat (0.1 per cent year-on-year growth) to reach a total of £9bn.

The outlook for the total UK advertising market in 2023 suggests that while growth will be minimal at 2.6 per cent year-on-year, the outlook has improved (+2.1pp) since the previous forecast in April, with spend now expected to reach £35.7bn. These figures also reflect the return to growth of key online formats, with internet now forecast to account for 76.7 per cent of all spend this year – and 77.6 per cent next year – in comparison to 75.1 per cent in 2022.

The muted outlook for this year in part reflects the inflationary pressures faced by all businesses and families, with the projections for 2023 suggesting a -4.3 per cent contraction to the market in real terms.

Sporting events of the Women’s World Cup and the Para Athletics World Championships are, however, set to provide a boost to the UK advertising market in Q3 of this year when, most notably, TV spot and sponsorship as well as radio and out of home are expected to see adspend growth. Another channel set to see further post-pandemic recovery is cinema, which is projected to record 20.8 per cent year-on-year growth this year, buoyed by the release of blockbusters such as Barbie, Oppenheimer and Mission Impossible: Dead Reckoning Part One.

The latest dataset suggests the UK’s ad market will grow by a further 4 per cent in 2024, to a value of £37.1bn. This represents a slight downgrade (-1.3pp) from AA/WARC’s April forecast but equates to +1.1 per cent growth in real terms.

Stephen Woodford, CEO, Advertising Association, said: “This latest forecast indicates a slight improvement in outlook in terms of growth of spend, with the improvements in online forecasts being notable. However, with high inflation continuing to depress consumer and business confidence we may end up seeing a real-terms contraction of nearly 4.3 per cent in 2023 for UK advertising investment. The recent higher-than-expected fall in inflation will hopefully continue and with that we will see confidence begin to build later in the year and into 2024, when the ad market is expected to return to growth.

“It is vital to recognise the value that advertising brings to the economy in supporting competition, innovation and growth ahead of the General Election next year. Together with WARC, we will continue to monitor advertising expenditure results and provide guidance for our industry and policy decision-makers within the UK Government.”

The full picture in Q1 2023

The latest figures reflect key online formats returning to growth including search (+5.1 per cent) and online display (+3.6 per cent) in the first three months of this year. These two formats alone accounted for over two-thirds (76.2 per cent) of all advertising spend during the first quarter.

While legacy media had a challenging quarter, streaming platforms, particularly those owned by broadcasters, recorded strong results. Broadcaster video-on-demand (BVOD) spend rose 18.7 per cent during the first quarter and is set to continue posting gains over the forecast period.

Online radio also saw improved growth over the first three months of 2023 with growth of 7.6 per cent, while digital out of home (DOOH) continued to post gains (+6.8 per cent).

James McDonald, Director of Data, Intelligence & Forecasting, WARC commented: “With the economy flat over the last three years, and inflation remaining stubbornly high, macroeconomic headwinds continue to bear down on the UK’s advertising industry. That said, a welcome return to growth in key online sectors during the first quarter has been cause for an upgrade to our full year projections, with a forecast rise of 2.6 per cent demonstrative of more favourable trading conditions in the second half of the year.”