Advertising worth £100bn to UK economy

Warc, 1 February 2013

LONDON: Advertising contributes £100bn to the UK economy through a mixture of factors from stimulating competition to supporting jobs, a report has argued.

The Advertising Association, the trade body, and Deloitte, the business services firm, suggested that advertising "underpinned" 7% of the country's GDP in 2011, equating to £100bn overall.

More specifically, every £1 spent on advertising was said to yield £6. This total stood in the £2 to £4 range for most sectors, with the remainder linked to a better flow of money around the economy, and improved innovation, competition and productivity.

These figures were based on econometric analysis showing that a 1% expansion in expenditure on advertising generated 0.07% higher GDP per capita in one year, rising to 0.6% within ten years.

"In an economy where 60% of GDP is rooted in household consumption, the means to bring products to market must not be forgotten," said Tim Lefroy, chief executive of the Advertising Association.

Adspend, pegged at £16bn per year according to the AA/Warc Expenditure Report, was also found to support 550k jobs, including 268k at agencies and on the client-side, plus 83k dependent on the ad industry and 200k across the whole economy.

The Office for National Statistics has similarly stated that the exports of "advertising services", or the costs of creating and displaying ads, and arranging either of both of these, stands at £2bn annually.

As this does not consider the "broader role" ads play in generating demand for British goods abroad, the Advertising Association and Deloitte predicted the actual amount was likely to be higher.

Looking online, the report said that £33bn in high-street sales resulted at least in part from consumer research conducted on advertiser-funded websites, with online ads directly stimulating sales worth £9bn.

Referrals from search engines, social media and other digital platforms hosting ads also yielded £35bn in annual ecommerce revenues, meaning ads had a role in sales valued at over £76bn in all.

When factoring in issues like consumers switching channels and the fact many purchases may have occurred anyway, the ad-supported internet was said to supply £7bn in incremental benefits.

Within this, shoppers made £1.6bn in savings per year offline due to research on such websites, while £3.7bn in high-street sales were directly linked to these platforms, and £2bn in returns related to search and referrals from sites hosting ads.

Data sourced from Advertising Association; additional content by Warc staff