LONDON: Prospects for UK advertising spend appear to be worsening after GroupM, the media investment arm of WPP Group, downgraded its forecast for this year.

Overall expenditure is now anticipated to climb 1.5% in 2011, to £12.5bn, a reduction from the 3.6% level outlined by GroupM's previous analysis, published in December 2010.

Looking further ahead, the organisation predicted the ad industry would expand by 3.3%, to £12.9bn, next year.

The company's figures confirm trends detailed in the latest AA/Warc Expenditure Report, which estimated revenues should see lifts of 1.4% this year and a stronger 5.4% next year.

According to GroupM, television may grow by 1% in 2011, to £3.46bn, and secure £3.57bn in 2012.

Radio is pegged to remain flat this year, on £357m, and reach £375m next year, with cinema similarly static in 2011, yielding £171m, before securing £176m across 2012 as a whole.

Outdoor is more resilient still, as demand rises from £718m in 2011 to £754m in 2012, building on the £704m registered in 2010.

However, the outlook appears somewhat less favourable for newspapers and magazines.

"The year has proved harder going, particularly in print, and there is a similar narrative coming out of the other big European economies," the study said.

National newspaper spending is thus set to decline from £1.38bn to £1.32bn during the forecast period, totals hitting £1.36bn and £1.1bn regarding their regional counterparts.

Ad sales through consumer magazines could slip from £512m in 2011 to £481m by the close of 2011, while business titles haemorrhage almost £70m, tumbling to £332m.

The internet should be the primary beneficiary of such a shift, generating growth of 9.3%, to £4.3bn, this year, and a 7.4% improvement, to £4.6bn, next year.

Mobile display is also due to enjoy a substantial percentage surge, but starts from a modest base of £83m in 2010, standing at £141m in 2011 and £200m in 2012.

GroupM's projections for 2011 represent a significant slowdown on the 9% expansion logged in 2010, when confidence hardened among marketers and shoppers after the worst of the downturn.

Moreover, it suggested expenditure levels will actually match those from 1999 in real terms, and equate to around 0.8% of GDP, the lowest amount since 1971.

GroupM's report also referenced Deloitte research arguing that wage deflation and a "squeeze" related to tax and benefits will cost the average household £780 this year.

Such a penalty constitutes "the biggest drop since records began in 1955", and might be exacerbated by rising gas and electricity bills.

The study cited "three main hopes" which may still aid the ad sector: interest rates staying stable, retail adspend bouncing back in the fourth quarter and governmental advertising returning to growth.

In 2012, the Olympic Games, being held in London, and the Euro 2012 football tournament could potentially stimulate an "updraught" in revenues, it added.

"Most usefully, the advertising cycle follows wider corporate investment more closely than it does consumer spending, and the conditions and sentiment for investment remain more positive than those for consumers," GroupM concluded.

Data sourced from GroupM; additional content by Warc staff