IPA voices concerns over adspend growth figures

The IPA fears the AA's predictions are too optimistic and growth will slow down.

Britain's agencies are fearful of a fresh bout of economic gloom, despite a new set of bullish adspend forecasts.

The Advertising Association expects UK adspend to grow by almost 5 per cent in real terms this year, outstripping the performances of both the US and the euro-zone countries.

But the IPA believes the AA's prediction is too optimistic and thinks the industry will face a tough second half of the year amid slumping retail sales and a stalling property market.

The AA's figures suggest adspend growth in the UK will exceed that of the euro-zone, which is forecast to increase by 1.6 per cent in 2005 and by 2.3 per cent in the following year.

In the US, where adspend growth was strong last year, a weak dollar and a balance of payments crisis is expected to mean a modest 1.5 per cent increase in adspend this year, rising to 2.5 per cent in 2006.

Andrew Brown, the AA's director-general, said: "If the latest blip becomes a trend, then the forecasts will be under threat. But employment is still going up and the economy is basically sound."

The IPA's more downbeat view is based on its most recent Bellwether Report on UK marketing spend, which shows that the period of growth is faltering.

Hamish Pringle, the IPA's director-general, said: "The Bellwether Report shows a slowing down in the market, which is now being reflected by high-street retail figures."

The high street has experienced its worst six months for almost a decade, with a string of profit warnings and poor results from major players such as Marks & Spencer, French Connection, HMV and JJB Sports.

The slump is being blamed on the struggling housing market, which has led to reduced consumer spending and advertising industry leaders fear this could worsen if the chancellor, Gordon Brown, presses ahead with planned tax rises.

Meanwhile, adspends within the euro-zone are being held back by the ongoing problems in Germany, which is regarded as the continent's economic engine room.

However, some observers believe the UK's adspend growth will be maintained because this country tends to come out of recession more quickly than the rest of Europe as a result of its close links with the US.