As the whole of the UK continues to face a cost of living crisis that has seen inflation rates soar the industry is continuing to face a volatile market. However, the latest figures from The Advertising Association / WARC Expenditure Report show the UK’s ad market has experienced growth of 8.8% to £34.8bn in 2022 in the final quarter of the year.

Taking into account factors of inflation, reduced consumer spend and 2022 figures, the report has revised forecasts to suggest minimal growth of 0.5% in 2023, with spend expected to reach £35.0bn, before a 3.9% rise in 2024 to a total of £36.3bn. The revised figures come following reports that UK advertising spending fell by 5.8% between October and December 2022 which is the first time spend has decreased during a fourth quarter since 2009.

2022 in review

The past year saw businesses settle into the aftermath of the pandemic. Actual figures released in the report for the full year in 2022 confirm that spend was up by 8.8%, with the total figure standing at £34.8bn, but the momentum from a strong start faded out throughout the year. An uncertain economy and looming recession resulted in caution with ad spend as businesses ironed out long-term strategies. 

Growth by category mirrors a conservative approach as the likes of online advertising which amounted to 75.1% of total UK spend last year grew 30.1% in the first half of 2022 before falling 5.4% in the second half. As a result, total UK ad spend growth in the first half of 2022 is upwardly revised to 26.0%, while the total ad market contracted by 5.7% in the second half of the year.

“Sharp and sustained falls in social media spend – the first time this has been recorded in the UK – are likely to have been instigated by reduced advertising activity among the SMEs who comprise a ‘long tail’ of ad volume on social platforms and whose margins are under incredible stress as inflation bites. One in every 202 UK companies entered liquidation in 2022 – the highest rate in seven years – and it is unsurprising to see these pressures reflected to some degree within advertising trade,” explained James McDonald, Director of Data, Intelligence & Forecasting at WARC.

Cinema and out-of-home categories experienced the strongest growth in 2022 at 123% and 31.1% respectively. Yet such increase is to be expected in these categories as they experienced the strongest hit during the covid lockdowns. BVOD (+15.4% year on year) and Paid Search (+12.7% year on year) also experienced strong growth.

Looking ahead

Following the results of 2022, the forecast for 2023’s ad market has been downgraded to +0.5% (compared to +3.8% in January) reaching £35.0bn. 

“These figures reflect the broader macro-economic environment, with a cautious outlook as the UK economy narrowly avoids recession, but shows very little signs of real growth. Advertising investment is an important barometer of business performance and confidence in the economic outlook. It drives competition and innovation, supporting job creation and livelihoods, returning a ratio of £1 invested generating £6 of GDP.” explained Stephen Woodford, Chief Executive, Advertising Association.

Where 2023 and 2024 are expected to see high inflation and stagnation to subside, growth is predicted to pick up at a more reasonable rate. The report spells hope for the likes of cinema and OOH advertising which are predicted to maintain strong growth.

The industry can also find optimism in the fact that the UK remains the third-largest advertising market in the world, at a value of US$41.5bn, and saw the third-fastest growth rate of the top ten markets in 2022, behind only Brazil (+9.7%) and Australia (+9.4%). Yet, projections from WARC Media show that the UK is forecast to post the slowest growth among the top 10 ad markets this year.

“It’s clear from these figures that the UK needs a strong plan for growth, one that capitalises on the advertising industry’s talent to help businesses innovate and compete, and support jobs and livelihoods up and down the country. At the same time, we need to address the talent shortages faced by our industry – for example, working with Government to increase flexibility in apprenticeships, and answering the demand for digital skills and expertise which will equip our workforce for the future.” says Annette King, Chair, Advertising Association.

As businesses continue to face uncertainty, the advertising industry’s small growth demonstrates an ability to hold strong in an economy in flux. By investing in talent, supporting long-term business growth and being strategic about media planning, the advertising industry holds a strong opportunity to aid its own growth and contribute to that of the wider economy.