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Advertising could generate £100bn to economy

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Spending on advertising could generate “at least” £100 billion to the UK economy, according to a new report.

In 2011, some £16 billion was spend on advertising, adding £100 billion to UK GDP, though the effect on the economy as a whole is far greater, financial advisory firm Deloitte has said.

A report by the company, commissioned by the Advertising Association, noted that advertising is crucial for fuelling innovation and market expansion and found that every £1 spent on advertising generates £6 to the economy.

In total, advertising contributes at least seven per cent of total UK GDP and advertising firms support 55,000 jobs, while Deloitte also stated that advertising strengthens relationships between brands and consumers and allows people to make informed choices over what they buy.

Gavin Patterson, CEO of BT Retail and President of the Advertising Association, said of the findings: “Deloitte’s conclusions are startling. Advertising –to quote the report’s title – is economic fuel.

“We might think of it as oxygen in the economy – not just a successful industry in its own right but a vital element in flourishing UK markets and our successful media and creative sectors.

“The implications for policy-makers are powerful and compelling.

“If the task of government is to seek out policies that can encourage and sustain growth, then the time has come to look more closely at advertising.”

Online advertising is also a source of considerable economic regeneration, the report said, as online services provide £5 billion in value to consumers.

Searches made online account for 43 per cent of total visits to e-commerce sites with an additional eight per cent of visits coming from social networking sites.

Such sites rely on advertising for revenue and these referrals create £35 billion of online sales, Deloitte noted, presenting a huge opportunity for economic growth.

The report said: “The growth of the digital economy has changed the way that people research products and make purchases.

“These benefits are not limited to the digital economy, as advertising-funded sites also drive value for the high street.

“We estimate £33 billion in high street sales are supported in this way. In addition, online advertising directly stimulates an estimated £9 billion in retail sales per year.

“Taking these factors together, advertising contributes to £76 billion in total sales to the UK economy.

“Excluding those sales that would have occurred without the internet, the incremental benefit is estimated as £7 billion per year.”

Advertising has proved an increasingly vital weapon in retailers’ arsenals in recent months as the critical Christmas trading period saw retailers compete for consumers attention via festive TV ads and social media campaigns.

Department store John Lewis’ Christmas advert, entitled ‘The Snowman’s Journey’ proved most popular as 28.3 per cent of consumers surveyed by analyst firm Conlumino in December voted the ad their favourite of the season.

Published on Thursday 31 January by Editorial Assistant

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