The UK advertising market reached a record £31.9bn in 2021 according to full-year figures published by the Advertising Agency (AA) and WARC.
The figure marks a significant post-COVID recovery, and a 34.3% (£8.2bn) growth year-on-year. It is also £2.3bn ahead of what was previously forecast, said AA/WARC’s latest Quarterly Expenditure Report, and the largest growth year-on-year in 40 years. Inflationary pressures on the cost of advertising and a higher-than-expected increase in online advertising last year were the main factors for the steep rise.
Internet spend was the primary driver of growth, with a 40.5% (£6.8bn) rise to £23.5bn, while search and social media made up two-thirds of all growth last year. Search spend rose 38.5% to almost £12bn – ahead of previous projections by almost £4bn – while social spend climbed 50.8% to £6.4bn, overperforming by £2.3bn against forecasts made at the onset of the pandemic.
Almost three quarters of the UK’s ad market is now online, said the AA/WARC, with only China holding an equivalent split between online and offline advertising.
James McDonald, Director of Data, Intelligence & Forecasting, WARC said: “The COVID recovery last year was buoyed in part by the release of pent-up investment on established online platforms – as well as maturing ones such as TikTok – and in part by the emergence of retail media as a major contender for marketing budgets. The latter trend bears the hallmark of a new era in advertising, one which is set to fuel growth over the forecast period and beyond.
“Be that as it may, economic headwinds create uncertainty ahead; the consumer is being stretched further than at any other time since the Second World War, conflict in Europe has stoked market volatility and has exacerbated supply chain pressures, and the prospect of a UK recession cannot be ignored. Given the market’s current momentum, however, we do not yet see this translating into an advertising recession over the coming quarters.”
Growth forecast for the year ahead eclipses previous prediction
The easing of the COVID impact meant that the UK economy grew at the start of 2022, but concern remains around supply chain issues and AA/WARC notes that rising inflation and fuel bills has meant a sharp dip in consumer confidence levels.
But the findings indicate that demand for advertising is stronger than expected, with TV adspend expected to have increased by 16% in Q1 2022 compared to the previous year, and internet spend thought to have risen by 20%. Out of home spend was predicted to have more than doubled.
The strong figures mean that Q1 2022 is expected to be up 20% on Q1 2021. But growth will slow considerably over the rest of the year, said the latest report, until Q4 2022 as the FIFA World Cup takes place.
Despite the pressures, 2022 adspend is now forecast to grow 10.7% to hit £35.3bn for 2022, an upgrade on the 8.6% growth forecast in the previous Quarterly Expenditure Report. The optimistic outlook was driven by a strong Q1, higher cost per thousand impressions (CPMs) and demand due to the World Cup.
Social media spend is predicted to rise by 14% while spend in search is forecast to be up 12.2%, but out of home and cinema will be the largest growing formats in 2022, with forecasts of 31.5% and 213% respectively. Looking further ahead, forecasts for 2023 are for growth of 5.4% year-on-year.
Stephen Woodford, Chief Executive, Advertising Association, said: “The UK has held its position in 2021 as the largest advertising market in Europe through the pandemic and is now the third largest in the world, behind the USA and China. While further growth is forecast, inflationary pressures on the cost of advertising, and more generally, due to the ongoing geo-political uncertainties, mean we should be cautious.
“While lockdowns saw sharp declines in spend across some sectors, the pandemic presented our industry with opportunities to innovate and meet the public health challenges. The UK Government remained in pole position as the largest advertiser. Cover wraps in our print media informed the nation with ‘Stay Home’ public health messages; direct mail brought testing kits and essential deliveries to households up and down the country; and billboards showed the everyday heroes in our NHS.”