Sir Martin Sorrell’s repeatedly downbeat predictions of future adspend growth – regarded by many media observers as a classic case of underpromising before overdelivering – may turn out to be accurate, according to a pessimistic report by WestLB Panmure.

The investment bank warns that growth in worldwide ad budgets could be delayed until 2004 (as Sorrell has predicted) if there is a war in Iraq and America’s economy deteriorates into a ‘double-dip’ recession.

Such developments, both of which look more likely by the day, would lead to a 1% decline in adspend in 2003, a far cry from recent hopes of 3% growth. In addition, a poor fourth quarter could result in a 2.5% drop in 2002 spend, compared with earlier expectations of a 1.5% fall.

“While we have seen a tentative upswing in US advertising in the last two quarters, Europe has worsened and the current economic and political uncertainty is likely to dampen the flickering US recovery in the fourth quarter,” said WestLB.

"Looking into 2003, we no longer see advertising recovery as a safe scenario in such an uncertain climate.”

The report nevertheless hedges its bets, saying advertising could prove better – or, indeed, worse – than forecast. “Only time will tell whether our assumptions transpire to be too gloomy … We cannot honestly even portray them as 'worst case', since global advertising could clearly get worse than -1% globally in the event of a major war in the Middle East.”

As a result, WestLB cut its revenue predictions for media stocks, slashing forecasts for Reuters, WPP Group and Carlton Communications in particular. The latter is one of two dominant shareholders in British commercial television giant ITV, about 30% of whose advertising comes from US firms.

The bank recommended buying ‘defensive’ stocks, namely those with lower exposure to the ad market. Such firms include BSkyB, Pearson and magazine publisher Wolters Kluwer.

Data sourced from:; additional content by WARC staff