Advertising market to remain flat in UK, warns forecaster

Advertising expenditure in the UK is forecast to be virtually static for the second year in succession, as it fails to mirror the recovery seen in the US, according to a leading industry forecaster.

Advertising expenditure in the UK is forecast to be virtually static for the second year in succession, as it fails to mirror the recovery seen in the US, according to a leading industry forecaster.

Zenith Optimedia said the disappearance of Sars and the end of the Iraq war have not produced any positive bounce in UK ad spending. It will grow just 0.4 per cent this year - compared with 2.7 per cent growth in the US this year and 2.9 per cent globally. In 2004, the UK will see expansion of 3.2 per cent but this will still be behind the rest of the world and well below the annual rate of ad revenue growth seen here in the 1990s.

Zenith blamed weak consumer demand in the UK for its underperformance, with "too many unproductive public-sector jobs financed by excessive taxation". In real terms UK ad revenues will contract by 2.6 per cent in 2003, making this country "fastest shrinking of the big five European markets". Even in economically moribund Germany, ad spend will do better, with a 1.9 per cent drop in real terms.

The UK television market is particularly weak, in contrast to strong "upfront" TV sales in the US. "The TV market [in the UK] is notably uninfected by US upfront enthusiasm having endured the worst share loss of any medium since 1999, with no prospect of restoring its real revenue within this forecast period [the end of 2005]," Zenith said.

There will be no growth in UK television revenues, with ITV suffering, while the multi-channel players will see some gains. ITV's share of revenues will "fall slowly" in 2003 and 2004, despite better audience performance this year. However, Zenith added: "Despite reports to the contrary, ITV is not dying."

There will also be no growth for the national press in 2003, with only a "marginal" uplift in 2004. The largest ad category to still be suffering is finance and while travel too has been in decline, there are signs of this now recovering. "Though display advertising was buoyant in January, the war effect kicked in from February and there has been at best slight growth and at worst double-digit revenue declines dependent on title strength," Zenith said.

This gloomy assessment was echoed yesterday by Sir Martin Sorrell, the chief executive of the advertising giant WPP, who painted a cautious picture about the health of the UK economy. "I feel better about things than I did five months ago, but I am not euphoric," Sir Martin said.

The WPP chief, whose reading of the runes of the economy are keenly listened to in the City, said: "I would rather be where we are today economically. We needed to have a correction rather than carrying on with unsustainable levels of activity."