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Forecast: UK ad market to recoup losses in 2021

January 26, 2021

The latest AA/WARC Expenditure Report anticipates 15.2 per cent growth in the UK’s advertising market in 2021, ahead of other key markets including the US and China. This is due to strong online activity, particularly within the e-commerce and online video sectors.

A strong year ahead

In 2021, the UK ad market is set to accelerate past last year’s decline and back into growth to push past 2019’s high (£25.37 billion) and reach of £26.69 billion.

While plenty of uncertainty remains, glimmers of hope surrounding the vaccine, and a Brexit trade deal finally in place, provide the foundations for recovery.

The sectors hit hardest stand to make a strong recovery, with cinema expected to grow 228.4 per cent reflecting its almost year-long 2020 shutdown.

Other expected strong performers:

  • digital out of home at 53.6 per cent
  • traditional out of home at 37.7 per cent
  • video on demand at 21.2 per cent

2020: rough but better than expected

The preliminary estimate for growth in 2020 now stands at -7.9 per cent with adspend of £23.17 billion, a marked improvement of +6.6 percentage points on the previous outlook, thanks mostly to a boost in online adspend, spurred by increased e-commerce penetration.

While the UK ad market declined -7.7 per cent on a Purchasing Power Parity (PPP) basis during 2020, this was softer than the -10.2 per cent decline of the global advertising market and that of the rest of Europe (-13.7 per cent). The first nine months of 2020 registered a particularly sharp dip, in which spend plummeted -11.1 per cent to £16.2 billion.

“Not only does the data show the overall decline expected in 2020 may be less than feared, but the recovery in 2021 will be stronger than we would have dared hope even a few months ago,” commented Stephen Woodford, CEO of the Advertising Association.

Because the internet

A better-than-expected headline decline of 3.3 per cent in Q3 2020 is considerable in light of the gloomy (-17.9 per cent) October 2020 forecasts, mostly thanks to booming online spend.

  • Internet spending grew by 10.1 per cent to reach $4.2 billion during the quarter
  • Search spend, key to capturing increased demand for e-commerce, grew 14.5 per cent, closely followed by online display (pure play) at 13.9 per cent growth

James McDonald, Head of Data Content at WARC explained that the largest online companies benefitted hugely from consumption and commerce migrating online, and that ad money followed.

“Paid search – which accounts for over a third of all advertising spend in the UK – was the format that gained most from a surging e-commerce sector. Ancillary research by WARC shows that online sales recorded a six-year leap in penetration in 2020, as e-commerce’s share of all UK retail value rose by 8.4 percentage points to 27.6 per cent. This rate was ahead of China (24.9 per cent) and double that of the US (13.4 per cent) last year,” said McDonald.

Reacting to the latest results, Ali MacCallum, CEO UK, Kinetic Worldwide, stated: “It’s really welcome news to start the year that not only was last year’s decline gentler than feared, but that recovery is set to be stronger than we had imagined.  The current lockdown has – inevitably – set us back, but we’re confident that brands and agencies now have robust enough plans in place to move quickly when the worst is over.”

Anne Stagg, UK CEO at Merkle, struck a note of cautious optimism, saying: “Clearly, the months ahead may not be smooth sailing, but tentatively, we can expect 2021 will be stronger than we could have imagined mere months ago as brands are better prepared and willing to adapt to the change required to make a difference.”

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