Prospects mixed for UK ad market

05 July 2012

LONDON: Prospects remain mixed for the UK ad market, as budgets are still under pressure and the economic recovery continues to stutter, according to the latest AA/Warc Expenditure Report.

The Expenditure Report revealed that adspend levels, excluding direct mail, rose by 1.1% on an annual basis in the first quarter of 2012, to £3.5bn. However, in real terms, after accounting for inflation, figures fell by 2.3% year on year.

More specifically, internet revenues climbed by an estimated 11.1% at current prices, and the web saw its share of the market expand by 3.3 percentage points measured against Q1 2011, reaching 36.2% overall.

By contrast, conditions proved especially challenging for press, off by 10%. As a consequence, this medium's share of the market shrank by 3.1 percentage points, taking it to 25.2% of total spend.

Television, accruing 28.4% of revenues, also witnessed demand slide by 0.7% in Q1 2012. More positively, cinema enjoyed a 9.5% increase, standing at 6.9% for radio and 3.1% when discussing out-of-home.

"It remains a very short term market. There is some evidence that TV advertisers, for example, have brought budgets forward to Q2 from Q3 to get the benefit of marketing spend now as prospects for the rest of the year remain unclear," said Suzy Young, Warc's data editor.

Looking ahead, the analysis predicted ad revenues should increase by 2.5% in 2012 at current prices, excluding direct mail, to £14.7bn. TV is set to post a 0.3% lift to £4.2bn, with the internet up 10.1% to £5.3bn.

Government spending, heavily reduced as a result of the economic austerity programme currently being implemented in the UK, is expected to accelerate faster than any other category this year, providing a particular boost to radio.

Even further into the future, the UK's ad market is anticipated to expand by 4.4%, to £15.4 bn (excluding direct mail), in 2013. Press demand is due to stabilise by this date, after experiencing a 5.1% decline in 2012.

Less favourably, the growth rate forecast for this year constitutes a downgrade of 1.3 percentage points compared with the Expenditure Report from April. The totals for next year were also cut by half a percentage point.

Direct mail, pegged at £2bn for 2012, was omitted from the 2012 figures as the Royal Mail changed its category definition at the start of the year to include items like unrequested catalogues and vouchers, making year on year comparisons difficult.

For more information about the AA/Warc Expenditure Report, click here.

Data sourced from Warc