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How advertising can unlock UK growth potential

The IPA welcomes the new AA/Deloitte Advertising Pays 2 Report, published today (Thursday 30th January 2014) which reveals that an increase in SME advertising would help support UK economic growth.

30/01/2014

The report suggests that small and medium sized enterprises (SMEs) are not investing in advertising, which is limiting growth domestically and overseas. An increase in investment in advertising will lead to SMEs and their exports growing, helping to further sustain the UK economy.

Says Paul Bainsfair, Director General, IPA: “It's always good to get more evidence to prove the vital role advertising plays in the growth of companies and the economy as a whole. This report is a major contribution to our existing strong body of data.”

Download the full report here.

Full AA release:

UNDER-INVESTMENT IN SME ADVERTISING HAMPERING UK’S ECONOMIC GROWTH

UK advertising must help to remove barriers

A new report released today reveals that, despite the critical role small and medium sized enterprises (SMEs) play in supporting the UK’s economic recovery, only 30 per cent of these businesses invest in advertising, an activity which helps to stimulate competition, innovation and expansion.

“Advertising Pays 2: How advertising can unlock UK growth potential” – a report by business advisory firm Deloitte, commissioned by the Advertising Association – has found that although SMEs currently account for 50 per cent of jobs in the UK and 40 per cent of UK revenues, they represent just 18 per cent of total advertising spend. Cash flow and the perception that advertising is too expensive are cited as major barriers to investment in advertising for these businesses, and financial concerns are not just restricted to the smaller companies. Among businesses with more than £10 million turnover, not even half (46 per cent), currently advertise.

Tim Lefroy, CEO, Advertising Association says: “Advertising pays, no matter the size of the business. There are sharp lessons here for entrepreneurs, policymakers and crucially for advertising itself.”

The analysis confirmed SMEs that invest in advertising are much more likely to achieve growth. Every £1 spent on SME advertising has eight times the relative impact on growth as £1 spent on advertising for larger firms. Even among micro-businesses, almost two thirds (59 per cent) of those that advertise reported a direct increase in sales.

The report also uncovers that SMEs believe additional support from government and industry would better enable them to advertise effectively. Those interviewed prioritised help with managing the short-term cost of advertising, more practical advice and support in relation to both domestic and international marketing, and a clearer route to support that already exists – due to low awareness of the large number of support schemes already available.

The report goes on to reveal that an increase in SME advertising will help support:

  • Jobs and growth – SMEs already account for the majority of new job creation in the UK. With increased advertising investment, they can become more successful, therefore supporting employment and growth.
  • Innovation – advertising will help SMEs create demand for new products.
  • Exports – just 19 per cent of UK SMEs export their products and services (compared to 25 per cent of the EU’s SMEs). By exporting at the same rate as European competitors, UK SMEs could increase the value of their exports by £40 billion.

Creative Industries Minister Ed Vaizey says: “The UK advertising industry has a tremendously strong international reputation – a disproportionately large number of global iconic advertising and marketing campaigns have involved UK creative talent. This research clearly identifies the central role of the advertising industry in helping secure our economic recovery, particularly the part it plays in helping SMEs right across the economy to grow.”

Sam Blackie, Director, Deloitte adds: “The UK’s recent return to growth has been mirrored by increases in advertising expenditure, and advertising contributes a great deal to the economy. This report shows that the UK’s SMEs are crucial to maintaining this trend, yet more still needs to be done to ensure that these businesses are taking advantage of the opportunities that advertising can offer. An increase in investment in advertising will lead to SMEs and their exports growing, helping to further sustain the UK economy.”

ADVERTISING PAYS 2 IN NUMBERS

  • UK SMEs account for 50 per cent of jobs, 40 per cent of turnover but only 18 per cent of advertising spend.
  • 30 per cent of UK SMEs currently invest in advertising.
  • 64 per cent of SMEs believe advertising ‘has been a success’ with the same number seeing it as value for money.
  • Every £1 spent on SME advertising has eight times the relative impact on growth as £1 spent on advertising for larger firms.
Last updated 30/01/2014


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