UK ad spending predicted to decline 17% in 2020 due to effects of coronavirus

The COVID-19 pandemic is having a serious effect on UK advertising spending, according to the latest Expenditure Report by the Advertising Association (AA) and WARC.

For 2020, ad spending had been predicted to rise 5.2% to a total of £26 billion. This has been downgraded to £21.13 billion – a drop of 16.7% year-on-year from £25.36 billion in 2019.

“Despite a good 2019 and promising start to 2020, COVID-19 has affected UK advertising as it has all parts of the economy and the falls we are seeing in ad spend come as little surprise,” said AA chief executive, Stephen Woodford.

“The current quarter will be a tremendously tough time for many businesses across our industry. We are acutely conscious of their predicament and working fast with Government and officials, so that they get the best support possible.

However, the report predicts that ad spend will return to normal growth in 2021, rising 13.6%.

Online and digital formats continue to perform well while traditional media is likely to see more significant losses in 2020 due to the coronavirus.

Search and online display rose 17.8% and 17.4%, respectively last year. They are estimated to decline by 12.1% and 12.7% in 2020.

Meanwhile, video on demand rose 15.5% in 2019 while TV saw a decline of 3.5%.

Publishing revenues will continue to decline in 2020 and out-of-home formats are also seeing losses as people are confined to their homes.

“Instinct might tell businesses to be cautious in their advertising at this time and we all need to be mindful of the unusual times we’re living in,” Woodford added.

“But at the same time, the importance of advertising during a downturn cannot be overstated. The vast majority of ad spend, nearly 85 per cent, will still be invested this year, and businesses should ensure they are in the best possible place – and best possible shape – to take advantage of a return to growth when it comes. History shows the brands that emerge fastest and strongest are those that invest in advertising during a downturn.”

The AA said it was partnering with the advertising industry to innovate and boost ad spending. One scheme involves tax credit schemes for ad and marketing services. Other measures the AA is calling for include:

• A phased-down extension of the Job Retention Scheme when lockdown ends, to avoid a wave of redundancies by companies with cashflow problems.

• Priority to be given to the advertising production sector to allow it to start up again as soon as possible and to ease its transition from lockdown. Production has virtually stopped and by its nature it requires human presence so there will need to be new arrangements around social distancing.

• Government to provide support in the credit insurance markets to ensure that cover limits offered to agencies are sufficient to allow all those UK advertisers who want to advertise to do so without constraint in this respect.

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