Carat’s Ad Spend report released today references the vote to leave the European Referendum for the downgrade.
Despite slower growth, the UK will remain the top market in Western Europe and fourth globally.
Carat expects adspend in the UK to increase 4.6% in 2017, downgraded from 5.7%.
The UK growth is boosted by digital ads, according to the report, which accounts for a 53.6% share of the spend this year and is set to increase by 11.5% next year.
TV adspend is expected to grow by 3.6% this year, which the agency says follows the Uefa Euro 2016 football tournament.
Online video will grow by 44.9% this year and 36.4% next year, the report estimated.
Spend on social media is forecast to increase 32.7% in 2016 and 21.9% in 2017. The report added: "In particular, Facebook continues to grow faster than almost every other media supplier and is set to become the third largest media platform in 2017 behind Google and ITV."
Paid search is expected to expand 10.6% in 2016 and 8.4% in 2017, mainly through mobile.
Jerry Buhlmann, chief executive at Dentsu Aegis Network, said: "As the digital economy brings complexity, speed of change and disruption, it is only through digital that brands can build engagement and remain relevant to their audiences on a fully addressable and real-time basis.
"In a world where connectivity and convergence are now the norm, mobile, social and online video lead the rapid growth of digital investments. With more flexible, targeted and data-led media solutions, mobile, social and video are driving the demand for richer and more powerful consumer engagements, in the right place, at the right time."