AA/Warc downgrades adspend forecasts amid economic caution

13 Jan 2015  |  Ellen Hammett 
AA/Warc downgrades adspend forecasts amid economic caution

The latest UK advertising forecasts, released today, have been revised downwards, reflecting a more cautious outlook for UK GDP and concerns over the Eurozone in 2015. The Advertising Association/Warc report predicts adspend growth of 5.7% this year (down from 6.5%) with full year 2014 forecasts adjusted down from 6.4% to 5.8%.

Despite the more tentative forecast, the period 2014-2015 will witness the strongest consecutive growth years for UK adspend this century and reflects a sector significantly outperforming the wider economy.

"Two years growth at twice the rate of the economy is hardly a recipe for pessimism but adspend isn't immune to pressures on other sectors," said Tim Lefroy, chief executive at the Advertising Association.

"The underlying story, however, is of a sector continuing to feed growth, jobs and opportunity."

Commenting on the forecasts, Bob Wootton, director of media & advertising at ISBA, the body that represents British advertisers, said that although the figures have been slightly amended, it is still a huge success story for the UK and the economy.

"The forecast adjustment from the AA/WARC just shows that they are taking a more considered approach to possible impacts of other sectors on the advertising industry.

"In addition, the creative industries are still booming, according to figures also released today by the Department for Culture, Media and Sport. It is one of the strongest sectors in the UK which is now worth £76.9bn per year to the economy."

By sector

TV spot advertising rose 3.8% year-on-year (YoY), with adspend of £1,001m - slightly behind the AA/Warc's October forecast (down -0.9 percentage points) but a solid performance compared to Q2, which benefitted from the football World Cup.

Overall an increase of 6.0% is predicted for 2014, with adspend at £4,486m.

Radio (excluding branded content) enjoyed a strong third quarter, which followed an "exceptional" second quarter (growth of 17.7%).

Analysis shows that the retail, industrial and government categories all increased spend the in the three months ending September 2014. Overall the report expects an annual increase of 8.9%, radio's best performance since 2000.

Out of home experienced strong growth in Q2 which came to an end in Q3, dropping from 6.4% in the three months to June, to 0.6% in the three months to September.

AA/Warc predicts a rise of 2.1% for the year as a whole, buoyed by ongoing technological advances.

National newsbrands print ad revenues declined by 8.8% in Q3 2014 to £257m. Although this is worse than expected, digital adspend increased significantly more than expected to 21.4% or £54m.

Altogether the sector recorded a drop of 4.7% for the quarter. AA/Warc predicts a decline of -4.3% for the year.

Regional newsbrands recorded a decline of 3.2% in adspend in Q3 2014 compared with the same time last year, representing a 6.6% drop for print (to £269m) and a 24.6% increase for digital revenues (to £44m).

Forecasts have been revised up to a 3.7% drop in 2014, equivalent to £1,252m.

Magazine brands adspend dropped 2.8% in Q3 to £266m, comprising a 5.8% drop for print (to £186m) and a 5.1% increase for digital (to £79m).

Total adspend is predicted to decline 3.6% this year, downgraded by 0.3 percentage points from October 2014.

Cinema adspend saw its first drop of 2014 in Q3, experiencing a YoY drop of 10.1% to £42m. AA/Warc forecasts overall growth of 2.7% in 2014, bringing the value to £190m.

Internet adspend rose by an estimated 13.1% in Q3 2014, following growth of 17.2% in Q2. Total spend was valued at £1,753m.

AA/Warc anticipates overall growth of 14.8% in 2014, while expectations for mobile growth in 2014 remain stable at 56% - a total of £1,594m.

Direct mail adspend recorded a YoY decline of 4.1%, to £428m in Q3 2014. AA/Warc expects expect direct mail to decline, registering a full year dip of 2.2% in 2014. This represents a slight downward revision of 1.2 percentage points since October 2014.

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