Inflation to weigh on ad market, says Sorrell

THE inflation crisis will hold back the advertising market again this year, Sir Martin Sorrell has warned.

The ad tycoon said 2024 would continue to be challenging after rising inflation and a wider economic slowdown prompted brands to slash their budgets last year.

However, he said the downturn would not be as severe as borrowing costs start to ease.

Sir Martin said: “While it is early in the year, we are not expecting 2024 to show macro-economic improvement, and client caution on marketing spend will likely persist, although not at last year’s level given interest rates are likely to fall over time.”

The warning came as Sir Martin’s ad agency forecast a 4pc fall in revenues for the full year as lower spend by tech clients hits its top line. S4 Capital added that its operational profit margins would be between 10pc and 11pc. The company cut this estimate from previous forecasts of 13.5pc late last year.

Sir Martin, who founded S4 following his acrimonious departure from WPP, has said 2024 will be a “year of efficiency” as he attempts to turn around the agency’s ailing share price. The company has expanded rapidly in recent years but recently embarked on a round of job cuts in an effort to reduce costs. S4 said profitability improved in the second half of the year thanks to the cost-cutting plan.

The company said it expected improved performance in its content division but warned of a tougher outlook for the tech sector. Net debt is expected to be at the lower end of previous guidance between £180m and £220m, with around £10m of merger payments delayed into this year.

S4 Capital shares rose immediately after the update but ended the day down 8.3pc, leaving its market value at £216m. It was valued at £5bn in 2021.