UK adspend to plunge 16.7% in 2020 as AA reveals full extent of slump

Q2 is facing 39.1% drop, with every medium, including search and online, facing major falls.

Out-of-home: forecast decline of almost 19% in 2020
Out-of-home: forecast decline of almost 19% in 2020

UK ad expenditure is set to plunge 16.7% (or £4.2bn) to £21.1bn this year because of the coronavirus lockdown and economic slump.

The dramatic figures were revealed in the Advertising Association/Warc Expenditure Report, which is regarded as one of the industry's most authoritative surveys.

It reveals the shocking depths of the expected downturn, with the second quarter set to crash 39.1%, and lays bare how every medium is facing double-digit declines between April and June.

Even previously high-growth sectors such as internet search and online display are predicted to suffer badly in the second quarter, down by 29.6% and 31.8% respectively. 

TV is forecast to fall 46.6%, radio 44.1%, national news brands 45.3%, out-of-home 52.6% and cinema 100%.

The second-quarter forecast is similar to the findings of Campaign poll earlier this week, in which the majority of respondents predicted a hit of at least 40% in the next three months.

The AA/Warc report estimates the whole market will continue to suffer in the third quarter, down 24.3%, and fourth quarter, down 8.9%, following a good first quarter, when there was 4.6% growth.

A 16.7% annual drop would be worse than the 2008-2009 recession.

"There is no precedent," Stephen Woodford, the AA’s chief executive, told Campaign. "It's a cliché to say it's unprecedented, but it's unprecedented."

Adspend had been on the up for 10 years, having increased by 6.9% to £25.4bn in 2019, and AA/Warc had expected growth of 5.2% in 2020 to more than £26bn.

A return to growth is predicted in 2021 at 13.6%, but "absolute levels of investment are not expected to surpass the 2019 total", the report said.

Woodford conceded the forecasts were only estimates in a rapidly changing environment, but noted that Warc has a good record.

"The accuracy of their forecasting has been shown to be pretty reliable over the years," Woodford said, explaining how Warc talks to media owners, agencies and other AA members.

"They have probably done more checking, cross-checking, double-checking, mapping and triangulating on this data [about the outlook for 2020] because it's so important."

Online and digital platforms performed "strongly" in 2019 and are expected to decline by less than traditional channels in 2020.

Search and online display were up 17.8% and 17.4% respectively in 2019 and are set to drop by 12.1% and 12.7% this year.

Video-on-demand grew 15.5% in 2019 but will drop by 6.3% this year, with the decline in overall TV accelerating from 3.5% last year to 19.8% in 2020.

AA/Warc expects 2021 to be a better year for both, with TV up 15% and VOD up 21.9%.

For the publishing sector, the ongoing decline is "expected to intensify", with a drop of 20.5% for national news brands, 24.1% for regional news brands and 25.1% for magazine brands this year. All three are all forecast for growth in 2021.

The biggest increases in adspend next year will be in out-of-home and cinema, which have been suffering most during the current lockdown.

AA/Warc said out-of-home will decline 18.7% and cinema 33.6% this year, and they will grow by 16.6% (21.4% for digital out-of-home) and 39.9% respectively next year.

Woodford said: "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."

He said the government's furlough scheme to protect jobs had been working well for much of the ad industry, but fewer companies have benefited from the coronavirus business interruption loan scheme.

The AA is calling for ministers to consider introducing tax credits to encourage businesses to invest in advertsing because of its ability to stimulate demand.

Woodford pointed to past AA research that showed a £1 investment in advertising can drive £6 of growth in GDP.

"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. But, at the same time, the importance of advertising during a downturn cannot be overstated," Woodford said.

"The vast majority of adspend, nearly 85%, 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."

James McDonald, head of data content at Warc, said: "This virus-induced recession is different to previous downturns in that the impact has been both swift and sharp across all media."

He added: "Media costs have fallen as a direct result of lower demand for inventory and this, paradoxically, comes at a time when consumption and reach has grown markedly across TV, social media and online publications. 

"Research on Warc from multiple sources shows that cutting advertising in a recession directly correlates with a slower recovery, but the practicalities of marketing in the current climate mean sustained investment is simply no longer feasible for a number of large product sectors."

Despite the tough outlook, Woodford said it was "a great tribute to the industry" that it has been able to adapt and has shown "resilience" and "ingenuity" in working from home and continuing to do business and create ads.

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