The United Kingdom advertising market showcased remarkable resilience and growth in 2023, reporting a record-breaking £36.6 billion in adspend, a 6.1% increase from the previous year.
This growth, detailed in the latest Expenditure Report by the Advertising Association (AA) and WARC, marks the sector’s 13th annual expansion in 14 years.
The report highlights the market’s promising trajectory, projecting continued growth into 2024 and beyond.
Robust Growth in 2023
In 2023, the UK advertising market achieved a milestone with a total ad spend of £36.6 billion, reflecting a 6.1% increase from the previous year.
Despite the real terms contraction of 1.2% due to prolonged inflationary pressures, the market outperformed its European neighbours. Ireland‘s ad spend grew by 3%, France‘s by 2.1%, while Germany‘s market contracted by 0.7%.
The shift towards online formats was a significant driver of growth, with online advertising accounting for over three-quarters of all UK adspend.
Online ad spend rose by 11% to reach £28.7 billion in 2023, driving 78.4% of market investment. Out-of-home advertising was the only other medium to experience growth, capturing 9.7% of the market share.
The online advertising segment’s dominance underscores a broader trend of digital transformation, with businesses increasingly prioritising online platforms to reach consumers.
What’s more, this trend is expected to continue, further solidifying the importance of digital channels in the advertising landscape.
The Golden Quarter
For the first time, the AA and WARC provided a detailed breakdown of the golden quarter of 2023.
Adspend topped £9.7 billion in this period, a 7.4% year-on-year increase. This growth was led primarily by digital out-of-home (18.1%), broadcaster video-on-demand (15.9%), and search advertising (12.9%).
This period’s performance highlights the increasing importance of digital advertising formats, with businesses leveraging these channels to maximise their reach and engagement during the crucial end-of-year sales period.
Finally, the strong performance of digital out-of-home and broadcaster video-on-demand indicates a shift towards more dynamic and engaging advertising methods.
Future Projections
Looking ahead, the market is forecasted to reach £38.8 billion in 2024 and exceed £40 billion by 2025.
However, the 5.8% projected rise in ad spend for 2024 represents a slight 0.1pp downgrade from January’s forecast due to ongoing inflationary pressures. Slower growth of 4.5% is anticipated for 2025.
Despite these challenges, the UK advertising market is set to remain robust, outpacing neighbouring markets by a significant margin.
The UK’s adspend is expected to surpass those of neighbouring countries by as much as £16 billion in 2024, showcasing the market’s strength and resilience in the face of economic headwinds.
Sector-Specific Insights
Retail and services were the only product sectors to record rising display ad spend in 2023, growing by 5% and 4.7% respectively. The services sector’s growth was driven by a 6.6% increase in the entertainment and leisure industry.
Broadcast media is expected to return to growth in 2024, led by TV (2.6%), cinema (2.5%), and radio (2.3%). Digital advertising formats such as search (8.9%) and online display (6.4%) are projected to see the strongest growth, maintaining a combined share of 77% of all ad spend by the end of the year.
The resurgence of broadcast media signifies a balanced approach to advertising, where traditional media complements digital strategies. This balance allows advertisers to tap into diverse audiences, enhancing their reach and effectiveness.
Industry Insights
The AA CEO emphasised the ongoing shift towards online advertising formats, reflecting the evolving economy where consumers increasingly shop both online and on the high street.
This shift is driving businesses to enhance customer experiences across all platforms. Additionally, the UK advertising industry’s global respect contributes to growing exports of UK advertising services, providing essential revenue in a stagnating domestic economy.
The WARC director of data, intelligence, and forecasting highlighted 2023 as a challenging year, with most media owners struggling to record gains.
The consolidation of spend within search and online display formats, particularly social media, was notable. These digital channels are expected to account for almost 80% of ad spend in the UK next year, a significant increase from 51% just five years ago.
The industry insights underscore the adaptability and innovation within the UK advertising market, where businesses continuously evolve to meet changing consumer behaviours and technological advancements.
Economic Context and Future Outlook
The report suggests that easing inflation over the next 18 months should create more favourable trading conditions within the advertising sector, fostering growth across a broader range of channels.
Major events such as the 2024 Paris Olympics and Euro 2024 are expected to contribute to the healthy growth of broadcaster video-on-demand (14.1%).
By 2025, the outlook improves further with an 11% rise in ad spend for broadcaster video-on-demand, along with increases for search (6.4%) and online display (5.5%) as economic headwinds ease.
The favourable economic conditions projected for 2024 and 2025 are expected to boost advertiser confidence, leading to increased investment in brand-building campaigns. This investment will likely drive innovation and creativity within the industry, further solidifying the UK’s position as a global leader in advertising.
Conclusion
The UK advertising market has demonstrated remarkable resilience and adaptability, achieving significant growth in 2023 despite economic challenges.
With continued investment in online formats and a promising forecast for the coming years, the sector is poised to maintain its leading position in Europe.
As economic conditions improve, the UK advertising industry is set to experience broader growth, driven by both traditional and digital channels.
What’s more, as this dynamic market continues to evolve, reflecting the changing landscape of consumer behaviour and business strategies, the sector’s future looks bright, promising sustained growth and innovation.
