UK ad spend is set to have the strongest recovery of any of the major global markets in 2021, placing the UK economy in a position to bounce back strongly on the other side of the pandemic, according to the latest Expenditure Report from the Advertising Association (AA) and WARC.
Spend is forecast to grow by 15.2% this year, reaching £27 billion and recovering all of the £1.8 billion decline recorded in 2020. The recovery is expected to be completed in 2022 when the market rises 7.2% to reach a record £29 billion. And this could be big for the UK economy as every pound invested in advertising generates six in GDP.
“Across the economy that advertising serves we saw remarkable innovation and agility, which helped to lessen the economic impact as firms adapted to keep serving their customers, despite the disruption,” said Stephen Woodford, Chief Executive at the Advertising Association. “The predicted growth this year of 15.2% is good news, with every £1 of advertising spend generating £6 of GDP, this will be a welcome boost for jobs and growth in the wider economy.”
A significant lift in ad spend is forecast to come in the areas most affected by the pandemic, with cinema gaining 266.8%, digital out-of-home up 52.3%, and traditional out-of-home adding 14.5%. Online classified investment is also set to enjoy an increase of 20.4% on the back of increased recruitment activity.
Online display is forecast to grow by 13.4% and paid search by 18.4%. The combination of the two is expected to account for 66.4% of all UK ad spend – up by more than 10 percentage points from a share of 56.2% in 2019.
On the other hand, though TV (+8.8%), direct mail (+6.4%), national news (+7.3%), regional news (+3.9%), and magazine brands (+6.8%) will all see ad spend grow, none look like they will recoup their 2020 losses until 2022.
Don’t look back in anger
Looking back at last year, total ad spend fell by 7.2% to £23.5bn. However, as a representation of changing fortunes, spend in Q4 2020 rose 2.6% to result in the highest quarterly total on record at £7 billion.
UK advertisers increased spend significantly across paid search (+7.1%), online display (+10.4%), and TV video-on-demand (+15.7%) last year in response to lockdowns. There was also a small increase of 0.5% for online newsbrands, but spend was down sharply across other media.
“Advertising investment has mirrored the rapid changes seen across the economy over the last year, primarily the acceleration provided by lockdowns towards ecommerce across all sectors able to sell online,” said Woodford. “The pandemic accelerated trends that were already changing the market, evident for several years. The UK’s sophisticated online advertising marketplace helped to keep the economy moving and, no doubt, supported businesses, large and small, to stay connected with consumers who were no longer on the high street. SMEs that had little or no online presence quickly adapted to serve their customers via online platforms and more sophisticated online businesses increased their investment behind these.”
Last year, the UK’s average ecommerce spend rose 47.1% to £2.1 billion, equating to 27.9% of all retail sales. This positioned the UK as the country with the largest ecommerce share as a percentage of total retail spend for the first time, coming out above China (24.9%), the EU (20%), and the US (14%).
“Agile formats with short lead times were seen to flourish last year, particularly within social media and e-commerce environments, the latter benefitting greatly from stay-at-home orders and well-established logistical networks,” said James McDonald, Head of Data Content at WARC. “Media owners in these spaces are expected to build on good 2020 results this year, though the situation will be more challenging across the remainder of the landscape as ad investment continues to favour performance marketing.”