Zenith predicts advertising revenue will contract this year

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The feeble recovery underway in the advertising sector suffered a hiccup yesterday after one of the leading forecasters slashed its outlook for Europe and warned that the UK market would contract in real terms in 2003.

The feeble recovery underway in the advertising sector suffered a hiccup yesterday after one of the leading forecasters slashed its outlook for Europe and warned that the UK market would contract in real terms in 2003.

Zenith Optimedia, the media buyer, predicted that advertising revenues would fall by 1.4 per cent in real terms in the UK this year. It expects major media advertising revenues across Europe to contract by the same amount in real terms. In current prices, Zenith slashed its expectations for the UK to growth of 1.1 per cent from 2.1 per cent predicted as recently as December.

The company said: "Weak corporate confidence, and the expectation that it will remain so, is probably doing most to stunt advertiser sentiment." It added that its "essentially bearish" view of advertising shadowed rather than ran ahead of economic growth, which itself was proving weak.

Jonathan Barnard, at Zenith, said advertisers had shifted some expenditure from the beginning of 2003 to the back end of last year. "2002 was not as bad as we thought it would be," he said. In current terms, Zenith said the UK market was flat last year, although it fell 2.1 per cent in real terms, allowing for inflation.

Zenith is predicting UK TV advertising will grow a modest 1 per cent in current terms, dragged lower by advertisers switching from ITV to cheaper cable and satellite channels. However, it said the growth of multichannel TV, where ad breaks are longer and more frequent, was positive longer term for the sector. Press advertising is expected to see little growth in 2003, with consumer magazines suffering in particular and only outdoor, radio and cinema likely to post real growth, Zenith added.

Zenith's views contrast with those of Aegis, a rival media buyer and research group, which predicted a 2.6 per cent rise across Europe in 2003. Most forecasters, including WPP's Sir Martin Sorrell, expect a full recovery to wait until 2004, when the US presidential elections and the Olympic Games in Athens will boost demand.

Mr Barnard said any hiatus in advertising caused by the war in Iraq was likely to be limited to the timing of campaigns. "Barring any huge shock it [the war] will shift expenditure out during the year....There is no real evidence of large scale withdrawals," he added.

Zenith, which is owned by Publicis of France and the UK's Cordiant Communications, was more upbeat about the US. It is predicting US advertising revenues will edge into real term growth of 0.2 per cent in 2003, while in December it was predicting a real term decline.

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