Report predicts UK ad industry to contract by £4.2bn in 2020

Charlie Spargo's picture

Following a record year in 2019 when ad spend hit £25.36 billion in the UK, research from the Advertising Association (AA) and WARC shows it is set to drop significantly in 2020 due to the impact of coronavirus.

The AA/WARC Expenditure Report shows that a 16.7% (£4.23bn) cut is set to take UK ad spend to £21.13 billion this year. After 10 years of consecutive growth and a healthy start to 2020, the arrival of the pandemic and almost worldwide lockdown has hit the advertising industry hard.

Before COVID-19, ad spend in 2020 had been predicted to grow by 5.2% to a total of more than £26 billion. The revised forecast is for advertising expenditure of £21.13 billion this year. By 2021, ad spend is expected to return to growth, according to the report.

Stephen Woodford, Chief Executive of the Advertising Association, said: “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 adspend come as little surprise. 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 adspend, nearly 85%, 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.”

James McDonald, Head of Data Content at WARC, added: “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.”

Full-year forecast summary

 Q1 2020

 Q2 2020

 Q3 2020

 Q4 2020

 2020

2021

Search

9.2%

-29.6%

-21.0%

-8.2%

-12.1%

13.3%

Online display 

11.0%

-31.8%

-23.6%

-6.5%

-12.7%

17.3%

TV

-1.8%

-46.6%

-25.8%

-8.0%

-19.8%

15.0%

of which VOD

11.2%

-27.2%

-17.0%

3.9%

-6.3%

21.9%

Direct mail

-8.4%

-45.0%

-22.0%

-11.0%

-21.2%

3.7%

Online classified*

3.3%

-51.1%

-27.3%

-17.3%

-24.3%

10.7%

Out of home

5.4%

-52.6%

-24.5%

-3.9%

-18.7%

16.6%

of which digital

11.4%

-49.4%

-20.6%

-1.5%

-14.7%

21.4%

National newsbrands

0.7%

-45.3%

-30.8%

-10.2%

-20.5%

8.7%

of which online

9.7%

-43.4%

-25.7%

-2.2%

-14.5%

17.7%

Regional newsbrands

-5.3%

-44.8%

-30.1%

-16.2%

-24.1%

3.5%

of which online

5.2%

-41.9%

-25.7%

-8.4%

-18.8%

16.7%

Magazine brands

-5.1%

-48.0%

-33.1%

-11.8%

-25.1%

8.6%

of which online

0.1%

-47.8%

-30.3%

-5.0%

-21.8%

16.8%

Radio

-1.7%

-44.1%

-25.4%

-13.6%

-21.0%

13.7%

of which online

-0.4%

-32.4%

-8.6%

-3.5%

-10.9%

12.5%

Cinema

8.0%

-100.0%

-41.2%

2.1%

-33.6%

39.9%

TOTAL UK ADSPEND

4.6%

-39.1%

-24.3%

-8.9%

-16.7%

13.6%