Bullish advertising industry forecasts 6 per cent rise in revenues next year

Advertising revenues are set to grow by 6 per cent next year, according to optimistic forecasts prepared by a leading industry body.

The forecast, due to be published shortly by the Advertising Association, is almost three times the rate of expansion predicted by Zenith, the media group that is usually seen as the leading UK forecaster of advertising spend.

The Advertising Association will release the latest statistics, seen by analysts at SG Securities, in the next few days. If the figures are borne out in 2003, the media industry will be given a huge boost. By comparison, Zenith expects the total UK advertising market to grow by just 2.1 per cent next year.

After massive growth in 2000, advertising revenues plummeted in 2001 and this year has seen sales fall even further below 2000 levels, to £11.53bn across all UK media sectors. The Advertising Association predicts that 2003 will see total advertising sales swell to £12.25bn, slightly ahead of the £12.22bn banked by media companies in the 2000 boom year (though after taking account of inflation, the 2003 revenues will be worth less than those of 2000).

Media companies tend to be highly geared to advertising revenues, meaning that seemingly small percentage changes in sales have a big impact on profitability.

Most media sectors have been reporting advertising sales growth, over 2001, in the last quarter of this year. The two parts of the industry which have broadly remained in negative territory however are national newspapers and business magazines, which have so far lagged the rest of media as it emerges from the two-year recession.

Even here, the Advertising Association, a federation of 25 trade bodies representing the advertising and promotional marketing industries, sees a strong rebound. Business magazines will see 2.7 per cent growth over 2002 levels, the Advertising Association will say, while newspapers will benefit from a 5.1 per cent increase in ad sales to £2.04bn – but still below the £2.25bn booked in 2000.

But it is television that will see the strongest return to form, with an 8.0 per cent increase in 2003, including an 11.7 per cent jump in the first quarter. TV businesses, including the troubled ITV – which makes up half the television ad market – have been reporting healthy year-on-year growth for some months. But again the Advertising Association's forecasts are much more bullish than other commentators. Merrill Lynch has just predicted that TV sales will be 3.3 per cent higher next year, compared with 2002, but within that ITV's revenues will decline 0.7 per cent.