That is where the good news ends, however, as the impact of COVID-19 is seen in a revised downward forecast for 2020. Prior to the outbreak of the virus, the projection was for 5.2 per cent increase in ad spend in 2020, to give a total of over £26bn.
The revised forecast, however, is for advertising expenditure of £21.13bn, which equates to a year-on-year reduction of 16.7 per cent – or £4.23bn – from 2019. Ad spend is expected to return to growth in 2021 with a rise of 13.6 per cent, but absolute levels of investment are not expected to surpass the 2019 total.
Online and digital formats performed strongly during the past year and they are forecast to decline by less than traditional formats over 2020. Search and online display grew by 17.8 per cent and 17.4 per cent respectively in 2019 but are predicted to fall by 12.1 per cent and 12.7 per cent respectively this year. Video on demand (VOD) recorded growth of 15.5 per cent in 2019 but, overall, TV saw a decline of 3.5 per cent. Both are expected to be affected by the downturn this year, with TV forecast to see a 19.8 per cent dip in advertiser investment and VOD a 6.3 per cent fall. Both are expected to rebound in 2021, with TV expected to grow 15.0 per cent and VOD an increase of 21.9 per cent.
The ongoing decline in publisher revenue that was recorded in 2019 is expected to intensify this year, with decreases of 20.5 per cent for national newsbrands, 24.1 per cent for regional newsbrands, and 25.1 per cent for magazine brands. All are then expected to record growth in 2021.
Given the restrictions on population movement and gathering ordered by the Government, formats including out of home and cinema are expected to see large falls in ad spend in 2020, with projected falls of 18.7 per cent and 33.6 per cent respectively. However, both are forecast to record some of the largest gains in 2021, with digital out of home (DOOH) seeing a rise of 21.4 per cent and cinema witnessing the highest increase of all formats at 39.9 per cent.
“Despite a good 2019 and promising start to 2020, COVID-19 has affected UK advertising as it has all parts of the economy and the falls we are seeing in ad spend come as little surprise,” said Advertising Association chief executive, Stephen Woodford. “The current quarter will be a tremendously tough time for many businesses across our industry. We are acutely conscious of their predicament and working fast with Government and officials, so that they get the best support possible.
“Instinct might tell businesses to be cautious in their advertising at this time and we all need to be mindful of the unusual times we’re living in. But at the same time, the importance of advertising during a downturn cannot be overstated. The vast majority of ad spend, nearly 85 per cent, will still be invested this year, and businesses should ensure they are in the best possible place – and best possible shape – to take advantage of a return to growth when it comes. History shows the brands that emerge fastest and strongest are those that invest in advertising during a downturn.”
The Advertising Association is working with partners across advertising on plans to boost ad spend and reactivate growth in the market. Advertising is a proven driver of economic growth in the UK, with every £1 invested returning £6 to GDP, and 1m jobs depend on advertising.
One of the actions being called for is a tax credit scheme for advertising and marketing services, with the aim of stimulating investment and encouraging advertisers to continue, or return to, advertising. Such a plan would also encourage companies that do not currently advertise, typically SMEs, to invest in advertising, the Advertising Association believes. It said this would also act as a stimulus for the wider economy and provide a welcome boost in investment for British commercial media. In 2019, consumer spending accounted for two thirds of UK GDP and so encouraging consumer confidence through advertising would be a boost to the national recovery.
The Advertising Association is also calling for other measures to rebuild confidence in the market. These include providing a phased-down extension of the Job Retention Scheme when lockdown ends, to avoid a wave of redundancies by companies with cashflow problems.
Priority should be given, the Advertising Association said, to the advertising production sector, to allow it to start up again as soon as possible and to ease its transition from lockdown. Production has virtually stopped and by its nature it requires human presence so there will need to be new arrangements around social distancing.
It is also calling on the Government to provide support in the credit insurance markets to ensure that cover limits offered to agencies are sufficient to allow all those UK advertisers who want to advertise to do so without constraint in this respect.
The Advertising Association said it welcomes the Government’s announcement on Monday, 27 April on Bounce Back Loans, which will help keep small businesses afloat. The AA would also like to see an extension of the business rates relief to the advertising sector, and relief on commercial rents for tenants.
Commenting on the figures, James McDonald, head of data content at WARC said:
“This virus-induced recession is different to previous downturns in that the impact has been both swift and sharp across all media. The deterioration of advertising trade, we believe, will be focused primarily in the second and third quarters of this year, though the aftershocks are likely to last into the fourth quarter and early 2021. The small and medium sized enterprises for whom digital advertising is a staple are particularly vulnerable during the lockdown period, and their recovery is expected to be protracted thereafter.
“Media costs have fallen as a direct result of lower demand for inventory, and this, paradoxically, comes at a time when consumption and reach has grown markedly across TV, social media and online publications. Research on WARC from multiple sources shows that cutting advertising in a recession directly correlates with a slower recovery, but the practicalities of marketing in the current climate mean sustained investment is simply no longer feasible for a number of large product sectors.”