Thursday 30 April 2020 12:01 am

Ad spend to suffer largest ever annual fall as Covid-19 wipes £4bn off market

UK advertising spend is set to crash by more than £4bn this year as marketing activity grinds to a halt during the coronavirus crisis, marking the sharpest annual fall on record.

Total expenditure is forecast at just £21.1bn for 2020, more than £4bn — or 16.7 per cent — lower than last year, according to industry figures published today.

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The figures mark a grim revision of previous projections, which had forecast growth of 5.2 per cent this year to more than £26bn.

The sharp downturn, sparked by the Covid-19 outbreak, marks the worst annual fall since records began in 1962 and will bring to an end 10 consecutive years of market growth.

Last year UK ad spend grew 6.9 per cent to pass £25bn, according to the new figures from the Advertising Association (AA) and Warc.

While the market is expected to return to growth in 2021 with a rise of 13.6 per cent, absolute levels of investment are still expected to lag behind last year’s figures.

AA chief executive Stephen Woodford told City A.M. that while the figures were unsurprising in light of the wider economic downturn, it was the speed of the collapse that was alarming.

“The sector has suffered a double whammy of a global shutdown as well as a domestic one,” he added.

Woodford warned it could take two or three years for advertising spend to return to last year’s level.

The figures showed ad spend is set to decline across all formats although online and digital, which have dominated the market in recent years, will drop less sharply than traditional media.

Search and online display ads, which grew more than 17 per cent in 2019, are both set to decline more than 12 per cent this year.

TV is also set to drop almost 20 per cent as broadcasters fail to sell slots despite a sharp rise in viewing figures and strong recent performance for video on-demand services such as All4 and ITV Hub.

Social distancing measures put in place by the government will hit the out-of-home and cinema sectors particularly hard, with falls of 19 per cent and 33 per cent respectively.

However, these formats are also set to make the quickest recoveries in 2021, with cinema expected to be boosted by a backlog of blockbuster hits.

Publisher revenue, which has been in steady decline for several years, is slated to fall even more rapidly this year, though a return to growth is expected next year.

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

“The deterioration of advertising trade, we believe, will be focused primarily in the second and third quarters of this year, though the aftershocks are likely to last into the fourth quarter and early 2021.”

The AA is holding bi-weekly calls with ministers as it looks to reactivate growth across the UK’s advertising industry, which has secured its status as one of Britain’s key service exports.

The trade body has called for a tax credit scheme for marketing and advertising services to make it cheaper for companies to continue advertising — a concern that is particularly relevant to small businesses.

It also urged the government to provide a phased-down extension of the job retention scheme when lockdown ends to avoid a wave of redundancies from companies with cashflow problems.

In particular, the AA said priority should be given to the TV production sector as a complete shutdown in filming has crippled supply of adverts as well as programmes.

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“The current quarter will be a tremendously tough time for many businesses across our industry,” Woodford said.

“We are acutely conscious of their predicament and working fast with government and officials, so that they get the best support possible.”