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UK ad market recovery continues but growth set for a decline in real terms in 2023 - report

David Murphy

UK ad spend rose by 4.3 per cent to a total of £8.5bn between July and September 2022, the ninth consecutive quarter of growth and demonstrative of an ongoing, resilient recovery from the COVID-19 pandemic. The numbers come from the latest Advertising Association/WARC Expenditure Report, based on ad revenue data collected directly from media owners.

The report finds that the UK’s ad market is expected to grow by a further 3.8 per cent this year, to an annual total of £36.1bn and following on from an estimated 8.8 per cent rise in 2022. The projection for 2023 is on par with the previous forecast (published in October 2022) but equates to a 3 per cent decline in real terms, once inflation is accounted for. Forecasts for the coming year show reduced growth expectations for almost all sectors of advertising, in line with pressures felt by all parts of the economy.

Figures for the first nine months of 2022 confirm that growth was up by 10.8 per cent, with the total figure standing at £25.3bn. Out of Home (OOH) and cinema, specifically, continued their strong recovery during Q3, while search rose 7.7 per centequating to almost 40 per cent of total ad spend during the quarter. Social media, included within online display, continued to grow, by 4.4 per cent, while broadcast video on-demand (BVOD) spend rose by 4.3 per cent.

Revised 2022 projections
The UK’s ad market is now thought to have reached a total of £34.7bn in 2022, as preliminary estimates put growth at 8.8 per cent last year. This represents a slight downgrade of -0.4 percentage points from the October projections. After accounting for inflation, real growth was thought to have been flat in 2022, at -0.1 per cent. Crucially, a retained recovery is projected for the ‘golden quarter’ (Q4 2022). Spend during this time was estimated to have grown by 4 per cent, to a total of £9.5bn, as the winter period hosted the two biggest events for ad spend: Christmas and the FIFA Men’s World Cup. This growth was still half a point behind previous forecasts, but should nonetheless be considered as a good performance given economic challenges.

Search is forecast to have grown by 11.7 per cent year-on-year in 2022, with 6.2 per cent year-on-year growth forecast for 2023. Online display is forecast to have grown by 7.4 per cent year-on-year in 2022, with 5.4 per cent year-on-year growth forecast for 2023. The largest forecast year-on-year growth in 2022 was cinema at 148.6 per cent, falling to 31 per cent forecast year-on-year growth in 2023. The next largest was Out Of Home at 33.7 per cent forecast growth for 2022, falling to 5.8 per cent in 2023.

“The UK advertising industry has held firm in its continued recovery from the COVID pandemic, with ad investment holding up in the face of significant headwinds,” said Advertising Association Chief Executive, Stephen Woodford. However, the economic pressures of 2022, including high inflation’s impacts on the wider economy and on media costs, means in real terms spend is likely to be flat. These pressures all contribute to slower growth projections for the year ahead.

“Advertising plays a vital role in helping brands communicate with their customers and navigate the cost-of-living pressures that everyone faces. As we publish our new 3-year strategy which puts trusted, inclusive and sustainable advertising at the heart of our mission, we are determined to show the economic and social value of responsible advertising to the UK.”