This Year, Next Year: U.K. Mid-Year Forecast Report

Brian Wieser

Seven key takeaways

The June 2020 U.K. mid-year forecast is marked by declines in consumer and advertising spend across the board. With the global pandemic impacting the U.K.’s society harder than most, slight growth projections for this year from as recently as early March have completely fallen away. It is now all but certain that the 2020 economy will be weaker than any in the past century. That’s according to consensus data as of the end of May tracked by Refinitiv that called for a 7.7% real decline in economic growth, surpassing expectations of a 5% decline as of the end of April.

The economic impact will likely be mitigated to some degree by government support schemes; however, it is unlikely any action could help to completely avoid decline. Some might argue this felt inevitable at the start of 2020 to begin with due to the imminent impact of Brexit – presuming an agreement is even achieved at this point.

However, we do see positive news on the horizon as the U.K. ad market is starting to stabilise after an initial freefall that began in late March. With that being said, following seven years of mid-to-high single digit growth, as of early June, we estimate that the advertising market will decline by 13% this year, followed by 13% growth in 2021.

For reference, the 2009 global financial crisis produced a 12% decline. Considering that economic growth will be significantly worse in 2020 relative to what was observed in 2009, the fact that the outcome for advertising in 2020 is only slightly worse is potentially surprising.

Understanding that context, here are seven key takeaways from This Year, Next Year: U.K. Mid-Year Forecast Report:

  1. Digital advertising is expected to decline by only 8% during 2020, with an expected rebound next year of 11% growth. We also estimate that e-commerce-related advertising will expand by 45% this year and another 66% next year on the way toward £2.2 billion in advertising revenue for media owners by 2024.
  2. Television advertising is expected to decline by 15% in 2020, followed by 13% growth next year. This includes -17% for linear TV in 2020 and +13% in 2021 as most of the spending cancelled during the second quarter of this year will effectively have been deferred, returning alongside pent-up consumer demand and a presumed return of otherwise “normal” trends next year.
  3. Print media is expected to decline by 24% in 2020 and then grow by 18% in 2021. Newsbrands are likely to fare worse, with an expected decline of 28% in 2020 followed by a 24% gain in 2021, essentially recouping most of this year’s lost revenues. By contrast, magazines are expected to decline by “only” 13% this year, followed by a 4% gain next year.
  4. OOH advertising is set to suffer more than most media during 2020, with a 35% decline expected this year and a 23% rate of growth expected for next year. New demand for outdoor advertising essentially stopped during the worst of the pandemic, generally only leaving media owners with the limited revenue that was associated with longer-term budget commitments and long-term ad placements. 
  5. Audio media is expected to fall by 16% this year and then grow by 14% next year. Overall, audio remains a cost-efficient vehicle and the growth in digital formats, especially podcasts, is generally making the medium more appealing to marketers. Digital streaming services should roughly double their revenues between 2021 and 2024 as a result, while the overall medium will likely see low single digit annual expansion.
  6. Cinema revenue has been heavily impacted by coronavirus, which forced the closure of all cinemas for 15 weeks from mid-March. Revenues are expected to fall 50% this year and recovery will be slow as social distancing measures remain when cinemas reopen, currently scheduled for July. We expect revenue growth of 25% in 2021 as clients seek presence in much of the film slate deferred from 2020.
  7.  2021 and Beyond: If a COVID vaccine is developed and distributed sometime in the first half of next year, we presume that all normal activities made challenging with social distancing will return in some form next year. Activities such as the Olympics are assumed to occur, as are all professional sports. Economic activity is presumed to be somewhat normal after 2022, although the scale of decline and the actions taken at the present time – and the impact of Brexit – will all have implications on the specific pace at which the economy expands, let alone when we return back to even just 2019 levels.

 

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