Advertising spend set to rise despite inflation

The report said the revision, which was 1.7 percentage points lower than the previous forecast in July, was down to high levels of inflation and squeezed margins caused by the cost-of-living crisis.

In addition, the report, which uses advertising revenue data collected directly from media owners, shows UK advertising spend rose by 8.8% in the second quarter of 2022 to a total of £8.6bn.

Advertising spend during the first half of the year was up 14.4% at £16.7bn, the report stated.

The AA and Warc estimated that the UK’s advertising market would grow 3.9% in 2023 to a total of £36.2bn, which is 0.5 percentage points lower than July’s forecast.

Online advertising will account for 74% of total spending on advertising in 2022, the report said, and is expected to exceed three-quarters of the market in 2023.

The second quarter of 2022 saw the continuation of strong recoveries for the out of home (+46.4%) and cinema (+2,208.2%) sectors, as well as positive results among national news brands (+9.1%), magazine brands (+3.3%) and regional news brands (+0.6%).

Advertising spend for the final quarter of 2022 is set to increase by 4.5% from last year to a total of £9.5bn, setting a new record level of investment during the Christmas period.

Stephen Woodford, chief executive at the Advertising Association, said: “It is encouraging to see strong figures in Q2, with media channels continuing their recovery from the Covid-19 pandemic.

“Looking forwards, political and economic stability is much-needed, given the inflationary and recessionary forces impacting all businesses. As companies navigate these pressures, we see them continuing to prioritise advertising investment to protect their brands in exceptionally challenging market conditions.”

James McDonald, director of data, intelligence and forecasting at Warc, said: “With the economic picture worsening amid ongoing political incertitude, the likelihood of a recession is now higher than when we last assessed market prospects in the summer.

“Against this deteriorating economic backdrop, a 9.2% rise in advertising investment this year would be impressive given that it is near double the average rate of expansion recorded prior to the pandemic.”