Broadcasters are facing the prospect of the worst year for TV advertising since the recession of 2009, as uncertainty over the likelihood of a hard Brexit has seen jittery companies strip more than £400m from marketing budgets.
Before the UK vote to leave the European Union in the summer, analysts had predicted another bumper year for the TV advertising market with forecasts of a boost of as much as over 7% to almost £4.7bn. This was on the back of a 10.4% year-on-year rise in 2015.
However, industry sources now fear the UK TV ad market could experience a huge negative swing with total advertising revenues potentially being down 1% to 2%.
This would result in the market contracting by about £420m, to £4.28bn, this year compared with the growth forecasted at the beginning of 2016.
If the market falls by 1% to 2% it will be the biggest decline recorded since 2009’s recession-fuelled 11% decline in the wake of the credit crunch.
Since that slump, considered by observers including WPP’s Sir Martin Sorrell to be the worst conditions in a generation, the UK TV ad market has enjoyed solid gains rising in total value from £2.98bn in 2009 to £4.37bn in 2015.
There has been a softening in the UK ad market in general since the referendum vote in June, as advertisers grew jittery about committing marketing spend amid so much uncertainty.
This situation is understood to have got much worse recently as the possibility of the impact of a hard Brexit looms.
“Since about four or five weeks ago things have got very tough,” said one TV industry executive. “It is not structurally about the TV advertising model versus other media such as online. TV ad spend is healthy in other markets, here it is about fears over Brexit hurting the market.”
It is understood that October figures have deteriorated to about 5% down year on year, while early estimates for the fourth quarter put the fall at about 4%.
“It’s difficult to see how even a bumper Christmas spend will save 2016’s figures, which at the start of the year were predicted to be very strong,” said a senior advertising executive. “It looks like it will be a big fall versus forecasts and at this point 2017 looks like it will contract as well.”
One observer said the situation was worse than it appears as the TV ad revenue decline comes as market figures are boosted for the first time by the inclusion of ITV’s video-on-demand (VoD) advertising. Channel 4 began to include its video-on-demand advertising in official figures in 2015.
“It is a cause of concern that the figures are where they are even with the inclusion of ‘extras’ now such as VoD advertising and sponsorship money,” said a second ad industry source.
