UK advertising expenditure reaches £36.6 billion in 2023 amid economic challenges
Despite a 6% increase in the UK's ad market in 2023, the overall growth rate, accounting for significant inflation, experienced a slight decline of -1.2% as highlighted in the recent AA/Warc report.
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The UK advertising market reached £36.6bn in 2023, showing a 6% growth as per the latest data from the Advertising Association (AA) and WARC.
Despite the growth in nominal terms, when factoring in high inflation, there was actually a 1.2% decrease in real terms spending, according to the most recent AA and WARC Expenditure Report. This means that advertising spend fell behind the UK's overall economic growth of 0.1%.
AA and WARC predict that ad spend will increase by 5.8% in 2024 to reach £38.8bn, slightly lower than the forecast in January due to ongoing inflationary pressures. It is anticipated that the UK's advertising market will surpass £40bn by 2025.
The forecast includes expectations of a 2.6% growth in TV ad spending, a 2.3% increase in radio advertising, and a 2.5% rise in cinema advertising. These sectors are expected to see a return to growth. Factors such as the men's UEFA Euros tournament and the upcoming General Election are likely to contribute to this positive growth trend.
Decrease in Traditional Advertising
Online formats received the highest portion of the UK's advertising budget at 78.4%, showing an increase of 11% from the previous year, reaching a total of £28.7 billion. The only other advertising channel that saw growth in 2023 was out-of-home, with a 9.7% increase.
Advertising spending saw significant reductions across various channels. Direct mail decreased by 12.6%, national newsbrands by 6.3%, radio by 3.3%, magazine brands by 9.1%, regional newsbrands by 10.1%, and cinema by 4.2%.
Additionally, TV experienced a decrease in ad spend by 8.9%. However, there was a growth of 15.9% in BVOD advertising, which helped offset the overall decline in TV advertising.
Retail and services were the only sectors that saw an increase in ad spend, with retail up by 5% and services up by 4.7%. This excludes search and classified formats.
The last three months of the year, also known as the golden quarter, experienced a year-on-year growth of 7.4% reaching £9.7bn. This growth was driven by digital out-of-home (up 18.1%), BVOD (up 15.9%), and search (up 12.9%).
"The shift towards online advertising formats is a reflection of how our economy is evolving. More and more people are choosing to shop online, in addition to traditional brick-and-mortar stores. Businesses are also focused on delivering top-notch customer experiences in every situation," explains Stephen Woodford, CEO of AA.
The UK advertising industry is highly regarded globally, leading to a growth in the export of UK advertising services. This growth serves as a valuable source of extra income for many advertising firms in a domestic economy that is experiencing minimal growth.
Editor's P/S:
The UK advertising market is experiencing a shift towards online formats, with traditional channels seeing a decline in spending. This reflects the changing consumer landscape, with more people choosing to shop and interact online. While the overall market grew in nominal terms in 2023, it actually decreased in real terms when accounting for inflation.
Despite the challenges, the forecast for the UK advertising market remains positive, with growth expected in 2024 and beyond. This is driven by factors such as the UEFA Euros tournament and the upcoming General Election, which are expected to boost advertising spend. The growth in online formats is also expected to continue, as businesses focus on delivering top-notch customer experiences in all channels.
