A cost of living crisis accompanied by domestic and international political instability and ongoing fallout from the Covid-19 pandemic has put pressure on the marketing budgets of UK brands in the past year but signs are that advertising spend is continuing to recover, with certain industries driving growth.

The latest Advertising Association/WARC Expenditure Report in October forecast that the UK advertising market was set to grow by 9.2% to £34.9bn in 2022. While significant, this did represent a downgrade of 1.7 percentage points from the July projection, taking into account inflation at a 40-year high, which has driven up interest rates and the cost of living.

UK advertising spend was up 8.8% year-on-year in Q2 2022, to £8.6bn, while H1 spend grew 14.4% to £16.7bn compared to the same period in 2021.

The report claimed that the market was on track for record high spend of £9.5bn in the final quarter of 2022, an increase of 4.5%, driven by activity around the FIFA World Cup, which was held in the lead-up to Christmas for the first time.

Stephen Woodford, chief executive of the AA, said: “UK advertising has seen a remarkable recovery from the coronavirus pandemic, racing ahead of key international markets with spend expected to cross the threshold of £30bn this year (2022). A strong advertising market is a key indicator of the UK economy’s growth, with every £1 spent on advertising generating £6 GDP.

“The latest AA/WARC report brings welcome news not just for our industry but for the wider economy, as advertising investment is a key lever for businesses to capture new markets and drive their recovery.”

Ad spend growth was expected to slow in 2023, with AA/WARC predicting an increase of 3.9% to £36.2bn, a reduction of 0.5 percentage points from the July forecast, influenced by the challenging economy, and the likelihood of a recession.

Despite the global economic slowdown and factors such as the ongoing war in Ukraine, there have been some positive indicators in the UK of late. Spending around the World Cup helped the UK economy record growth of 0.1% in November, against a prediction of minus 0.2%, according to the Office for National Statistics, albeit the economy shrank by 0.3% in the three months to November.

Furthermore, it was announced this week that inflation fell to 10.5% in the year to December, from 10.7% in November, although food prices continue to climb, and typical household incomes are on track to fall by 7% over this financial year and the next one.

A recession, defined as two quarters or more of falling output, remains on the cards, with the Bank of England having continued to hike interest rates, and downbeat about prospects for 2023.

However, the recent resilience of the advertising industry is borne out by figures from ALF, based on Nielsen data, showing that brands on the platform spent £3.2bn on campaigns in Q3 2022, 4.4% less than was invested in Q2, but up 5.3% from Q3 2021.

Technology has helped drive this growth, with notable increases in the market categories of Telecommunications, Internet and Publishing & Media, and many companies in these areas have also been active in sports and entertainment sponsorship.

In terms of media channels, television continued to lead the way in Q3, with spending of £1.2bn, ahead of digital on £970m, but the gap is closing, with the respective market shares now 39% and 30%, compared with 43% and 26% a year earlier.

The other channels were outdoor (£354m), radio (£204m), direct mail (£171m), press (£152m), cinema (£49m), TV sponsorship (£46m) and door drop (£22m).

Increasing ad spend in a recession

In tough economic conditions, with consumer expenditure impacted, the natural tendency of brands is to reduce the outlay on marketing. While in instances this belt-tightening may be driven by necessity, many experts argue companies that increase their spend benefit accordingly.

A report from Analytic Partners last August found that 60% of brands that upped their media investment during the last recession saw improvements in return on investment. By the same token, brands that increased paid advertising saw a 17% rise in incremental sales, while those that cut spending risked losing 15% of their business to competitors who boosted theirs.

“The best way to get through a possible recession and prosper on the other side of it is to think long term by investing in your brand and your relationships with customers,” said Mike Menkes, SVP at Analytic Partners. “Short-term thinking might make some shareholders happy at the next earnings report, but it undermines growth and therefore margins and true shareholder value both in the short and long term. A strong advertising strategy will lead to continued brand success that is stable and here to stay.”

A continuing trend during the cost of living crisis is the growth in online advertising in the UK, with its share of total ad spend set to hit 74% in 2022, and to rise further to 75.2% this year. In addition, while TV advertising was expected to be flat in Q4 2022, AA/WARC was forecasting growth of 7.3% in search advertising and 4.2% in video-on-demand advertising.

The growth in digital advertising at the expense of more traditional forms tallies with patterns in the wider economy, with growth in telecommunications and computer programming having helped “to push the economy forward” last November when there were further falls in some manufacturing industries, and strikes hit transport and postal, according to the ONS.

However, at a time of falling retail sales, both online and offline, and with consumers cutting back on major purchases and content streaming subscriptions, it is not enough to merely throw money at digital, with brands urged to take a strategic approach.

This could entail greater investment in contextual advertising, in which ads are placed on websites related to the content of those pages, as opposed to behavioural advertising, which is based on the browsing habits of the user and regarded as more intrusive.

In a guest article for MarTech Series, Peter Wallace, general manager – EMEA at contextual intelligence company GumGum, wrote: “Contextual’s ability to understand an audience’s mindset, and deliver appropriate adverts, is critical during these tough economic times because it allows brands to reach the right audience quickly and make every dollar count.

“A study from Dentsu found that contextual targeting is 29% more cost efficient than behavioural targeting, because marketers spend less cash reaching the right audience. That represents a huge saving for advertisers.”


Analysis of ALF advertisers shows that Telecommunications was one of the sectors with the largest growth in spend in Q3 2022, with a total outlay of £164m, up nearly 60% on the same period a year earlier.

This was driven by the likes of EE, which was among the highest spenders overall, at £31.5m, an increase of almost £21m, as it sought to increase its share of the market. The BT-owned brand spent £15m promoting EE broadband, and £13m on its mobile network.

August saw the release of the latest part of EE’s ‘Stay Connected Data’ brand campaign featuring a skydiving Kevin Bacon. Created by Saatchi & Saatchi London, the ad highlighted the service which allows customers unlimited backup on essential apps like WhatsApp and Maps, meaning they can stay in touch with people even when their data has run out.

Elsewhere, EE is the lead partner of the renowned Wembley Stadium, offering connectivity to fans at sports events and concerts at the renowned venue.

Another prominent player was Telefonica UK, the parent company of O2, which spent £30.3m, £17.1m more than a year earlier. This included £12m to advertise its O2 Switch Up scheme, £9.4m on O2 data roaming and £3.3m on low-cost service giffgaff.

O2 also enjoys significant exposure through its sponsorship of entertainment venues including The O2 in London, and, as a long-time sponsor of the Rugby Football Union, last autumn rolled out a campaign in support of the England women’s team taking part in the Rugby World Cup in New Zealand.

There was also significant Q3 spend, albeit with more moderate increases, at the core BT brand (£23m), Vodafone (£22.9m), TalkTalk (£13.8m), Hutchison 3G (£13m) and Tesco Mobile (£10.3m).

Internet and media

Companies in the Internet category spent just over £75m on advertising in Q3 2022, almost double the investment of a year earlier, although this was entirely attributable to website builder Squarespace, which paid out £49.3m, an increase of £41.2m, the highest of any brand in the quarter. This all went on digital advertising and supported a campaign created in-house, which featured a group of neighbours gossiping about each other’s business.

Overall growth in the Publishing & Media category was less pronounced, up 8.4% to £208m, but, on the technology front, there were notable increases in spend at Facebook and Instagram owner Meta, up £8.8m to £12m, and Google, up £4.7m to £16.5m.

Following two successive quarters of falling revenue Meta laid off 11,000 employees worldwide, equivalent to 13% of its workforce, in November, but has been forging partnerships with the likes of Microsoft, Accenture and Zoom as it seeks to strengthen its business presence.

There has been speculation, as yet unconfirmed, of significant layoffs at Google, but the internet giant remains a prominent advertiser, and in the second half of last year hired Leo Burnett to create a brand campaign to run in the UK and Ireland, and, through Google Pixel, was a sponsor of ITV’s coverage of the World Cup in Qatar.

Sky is well established as the biggest spender on advertising in the UK, with an outlay of £255.2m in the year to the end of September 2022, including £54.1m in Q3 alone.

However, there is a relatively new entrant in the upper echelons of the media spenders in Paramount Global, which took its expenditure for the year to £17.6m with an investment of £9.5m in the quarter as it rolled out a national campaign across all platforms to mark the release of streaming service Paramount+.

On a similar theme, Walt Disney increased spending by £7.7m to £19.6m in Q3 2022, including £10.5m on advertising for the Disney+ streaming service.

Traditional brands

While influential, technology was not the sole driver of growth in the UK advertising sector last year, with some traditional sectors and brands also making telling contributions.

Spending by food-oriented companies rose by 20% to almost £150m in Q3 2022, and significant among the top 20 increased spenders were Unilever, up £10.2m to £46.6m, and Arla Foods, up £15.2m to £23.5m. Meanwhile, yoghurts and desserts maker Muller more than doubled its spend, to £8.4m, but has ended its long-running sponsorship of UK Athletics and, by association, adverts involving some of the country’s leading track and field stars.

Meanwhile, Mars hiked its UK ad spend by £8.6m to £12.5m, just as Paul Weihrauch succeeded Grant Reid as CEO of the confectionary giant in September 2022, and Coca-Cola’s rose by £5.3m to £20.9m as the company prepared to launch its campaign as a sponsor of the World Cup later in the year.

Another World Cup sponsor, McDonald’s, was the second highest spending advertiser in the UK in the year to September 2022, with £165.4m, and its outlay of £41.3m in Q3 represented a 30% increase year on year. This coincided with the launch of MyMcDonald’s Rewards, its first ever loyalty scheme in the UK, with customers earning 100 points for every £1 they spent, but also an increase in the price of cheeseburgers and other products as a result of the inflation crisis.

Travel suffered more than most categories at the height of Covid-19 but revived as restrictions were lifted around the world, and the recovery continued in Q3 2022, with ad spend up 9% to £226m. However, it remains a volatile market, and there is little consistency, with some companies rolling out major campaigns just as others cut back on activity.

Long-haul airline Virgin Atlantic is one operator back with a vengeance, having increased spending from under £100,000 in Q3 2021 to £8.6m in the last reported quarter. This followed a £400m funding deal agreed with Virgin Group and Delta Air Lines at the end of 2021 to help steer it out of the pandemic.

Others with significant increases in ad spend in Q3 2022 included travel search engine Kayak, up £6.5m to £7.2m, cruise line operator Carnival, up £5.7m to £8.8m, and Hotels.com, up £4.6m to £10.9m.

A sector that has undoubtedly been negatively impacted by the cost of living crisis is automotive, and this is reflected in the near 20% decline in spend, to £150m, in the space of a year, albeit there was a 15% rise from Q2 2022.

The only major manufacturer bucking the trend is number one spender Volkswagen, which committed £19.2m in Q3 2022, an increase of £4.8m, or 30%, on the same period a year earlier, in part to promote its electric car range.

Notable climbers

The market category that saw the biggest increase in spending between Q3 2021 and Q3 2022 was Educational and Vocational, with a rise of almost 150% to £53m. This was largely attributable to Learn To Trade, a provider of online forex trading, with £12.9m, and new entrant Sell What You Know, which offers online mentorship courses, with £11.1m.

Other companies that have surged up the chart include The Financial Conduct Authority, which spent £24.5m, £23.6m more than it spent in the same quarter last year, and online bathroom specialist Victoria Plum, which increased its outlay from under £1m to £23.4m, with both focusing almost entirely on digital advertising.

Another significant climber in Q3 2022 was Protected.Net, an online security firm, with spending of £14.6m, up from £2.1m.

A new entrant for last year was finance app Revolut, which invested £8.6m in the quarter in a campaign promoting its mobile app created by Wieden & Kennedy.

By Simon Ward, Insight Editor


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