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ALF Insights

22 Feb 2024

Ad market outperforming wider economy

Simon Ward

The UK advertising market is benefiting from higher-than-expected growth, fuelled by soaring online spend, and the trend is set to continue in 2024 despite ongoing economic challenges.

A surge in UK advertising expenditure in Q3 has prompted market observers to revise upwards estimates of total spend for 2023, and, with marketing budgets showing the strongest growth in almost a decade, there are high hopes that the industry can contribute to economic revival this year.

  • At a time of continued high inflation and interest rates, the ad market has proved to be resilient, outperforming the wider economy with spend up 15.9% year on year in the period from July to September 2023, according to the latest Advertising Association and WARC Expenditure Report.
  • The above increase, driven in large part by the outlay on online advertising, has led to the AA and WARC upgrading their growth forecast for the full year to 6.4%, and, although economic conditions continue to act as a handbrake, a further rise of 5.9% is anticipated in 2024.
  • Total UK ad spend for 2023 is now projected to be £37bn, up from the £35.6bn predicted by AA and WARC last autumn, after online growth amounted to 22.3% in the period from July to September. The higher forecast for total ad spend of £39bn in 2024 reflects the increased overall outlay in the second half of 2023, soaring online spend and the projected return to growth of other channels, including TV.
  • The sense of optimism about the UK ad industry in 2024 is reinforced by the most recent IPA Bellwether Report, which showed marketing budgets revised up to their strongest level for almost 10 years. The survey results, which covered Q4 2023, found that 26% of respondents saw total budgets rise, more than double the 11.3% that reported cuts, resulting in a net balance of +14.7%.
  • In a challenging environment in which the world’s leading ad agencies have been impacted by cutbacks in spending by the technology giants, Publicis Groupe continues to outperform its rivels, with organic growth of 6.3% in 2023. There were also gains at Omnicom and, less markedly, WPP, but Interpublic Group was practically flat and Dentsu is looking to bounce back from a 5% fall in organic revenue last year.

A full version of this Industry Insights article is available to ALF subscribers here.

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