Mar 1, 2017
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Retailers cut UK advertising as inflation bites

Mar 1, 2017

British retailers, food producers and consumer goods makers are cutting back on advertising to direct their firepower instead at lowering prices in the face of rising inflation, hitting the income of media groups.

ITV , Britain's biggest free-to-air commercial broadcaster, said on Wednesday ad revenue for the first four months of 2017 would be down 6 percent after it reported its first annual fall in a key revenue stream since 2009.

"If you look at the categories that's coming from, predominantly it's food, and FMCG (fast-moving consumer goods) and retail," ITV's Chief Executive Adam Crozier said. "A lot of the marketing support there at the moment is going into supporting price cuts given the levels of inflation that are coming through in that market."

Inflationary pressures have been building in Britain since the country voted to leave the European Union in June, causing the value of the pound to plunge against the dollar. Retailers have been reluctant to pass the increases on to consumers, but there are signs that prices are starting to edge up in stores.

According to the Confederation of British Industry in February, retailers say they are raising their prices at the fastest pace in almost six years. The British Retail Consortium also said on Wednesday that food prices rose in February for the first time since April last year, up 0.4 percent on the year, compared with a fall of 0.8 percent in January.

Britain's biggest retailer Tesco said it was spending less on advertising on TV. Under the leadership of Chief Executive Dave Lewis, the supermarket group had increased its investment in prices, to draw in more customers, while reducing its investment in TV advertising, a spokesman said.

He said that in the same period Tesco's price perception amongst shoppers had improved.
Trinity Mirror , the publisher of the Daily Mirror tabloid, said it too had been hit by weak demand from the retail sector, driving overall print advertising revenue lower.

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