Brexit Economy Hits U.K. Ad SpendingBy
Media buyer cuts ad-market growth forecast to 4.1% from 7%
Young viewers abandoning TV also weighing on ad spending
Britain’s advertising market is slowing as the long road to exiting the European Union begins to wear on the economy and prompt marketers to pull back, according to the latest forecast from GroupM, the world’s largest media buyer.
U.K. ad spending is set to expand 4.1 percent this year to 18.6 billion pounds ($23.5 billion), compared with a previous prediction of 7 percent, GroupM, a unit of WPP Plc, said in a statement Thursday. The company now expects TV spending to shrink 2.7 percent in 2017, after previously forecasting little change.
The downgrade reflects the uncertainty faced by businesses after the Brexit vote and this month’s inconclusive election, which raised the prospect of more political upheaval. U.K. broadcasters, which include ITV Plc and Sky Plc, are also struggling to attract advertisers as younger viewers abandon TV in favor of mobile devices.
“We had previously discounted Brexit as a drag on the economy, but the recent U.K. general election has magnified rather than reduced uncertainty,” GroupM Futures Director Adam Smith said in the statement. “This is not helpful for growth when consumers and public finances are already under stress, and corporate investment subdued.”
Advertisers are becoming more cautious as U.K. households are increasingly squeezed by rising prices and declining real earnings. The fall in purchasing power is sapping consumer confidence, weighing on an economy that relies on household spending and piling further pressure on Prime Minister Theresa May following the election that cost her Conservative Party its parliamentary majority.
ITV shares slipped 0.6 percent to 177.5 pence in London at 8:40 a.m., while Sky declined 0.5 percent to 959.5 pence.
People aged 16 to 24 will probably view 10 percent fewer TV ads this year than in 2016, the company said.
The internet-ad market will expand 11 percent in 2017, rather than the 15 percent projected previously, the company forecast. The reduction is partly a result of “brand safety concerns,” with some companies halting advertising on certain video services. Earlier this year, advertisers pulled spending from Google’s YouTube over ads running on offensive content, including terrorism videos. In response, Google is increasing computing and staff resources to better flag the videos.
Publicis Groupe SA’s Zenith, another media buyer, earlier this week projected 0.9 percent growth for the U.K. ad market for 2017. That would compare with 9.6 percent expansion last year, the company said.
GroupM also gave its first 2018 forecast for the U.K. ad market, predicting growth of 4.5 percent. The TV ad market is forecast to rise 2 percent in 2018, while internet spending growth is set to soften further to 8.1 percent.