NEWS30 April 2020

Ad spend forecast to drop 16.7% this year

Covid-19 Media News UK

UK – Advertising spend in the UK is expected to fall by 16.7% in 2020 as a result of Covid-19 effects, according to the latest Advertising Association/Warc Expenditure Report.

Empty ads on Underground escalator

The projection for UK ad spend this year is now £21.13bn, compared to over £26bn forecast for 2020 prior to the Covid-19 pandemic and despite a strong first quarter.

In 2019, ad spend was £25.36bn, a rise of 6.9% year-on-year. Spend is projected to return to growth in 2021 with a predicted rise of 13.6%, however, the overall investment level is expected to remain lower than that seen in 2019. 

Ad spend has grown for 10 consecutive years, according to the Expenditure Report, largely driven by online investment. Online and digital channels including search advertising and online display experienced the highest budgets in 2019, and are expected to decline by less than traditional formats such as regional newsbrands and radio. 

Amid social distancing restrictions, advertising in cinemas and out-of-home ads are expected to take the biggest hits to spend this year.

All formats are projected to return to growth in 2021, according to the analysis.

Stephen Woodford, chief executive, Advertising Association, said: “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.”

The Advertising Association is calling on the government to introduce a tax credit scheme for advertising and marketing services, aimed at encouraging advertisers to continue or return to investment in ads and encourage spend from companies that otherwise do not advertise.

Previous research on recessions, including Meldrum & Fewsmith’s study of the US recession of 1974-75, indicates that companies that maintain ad spend during the downturn experience higher growth afterwards.

Woodford said: “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.”

James McDonald, head of data content at Warc, noted the “swift and sharp” impact of Covid-19 across all media, in contrast to previous downturns, adding: “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 Advertising Association is also calling for a phased down extension of the Job Retention Scheme once the UK has exited lockdown, to prevent a large number of redundancies.