Despite advertising stimulating competition, innovation and expansion, only 30% of UK SMEs make any investment, according to a new report from the Advertising Association and Deloitte.
As a result, SMEs, which play a “critical role” in supporting the UK’s economic recovery, are hampering growth, the report claims.
Advertising Pays 2: How advertising can unlock UK growth potential has found that although SMEs currently account for 50% of jobs in the UK and 40% of UK revenues, they represent just 18% of total advertising spend.
Cash flow and the perception that advertising is too expensive are cited as “major barriers” to investment in advertising, and financial concerns are not just restricted to the smaller companies. Among businesses with more than £10 million turnover, not even half (46%), currently advertise.
In a statement issued today, the AA said 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%) 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.
“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,” said Ed Vaizey, the creative industries minister.
“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 added: “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”.
