ITV outlook darkens as Brexit anxiety kicks in

The outlook for ITV has deteriorated significantly as advertisers pull back on spending amid anxiety about Brexit, according to analysts at Berenberg.

ITV CEO Adam Crozier

According to the German investment bank’s analysts, spot net advertising revenue for ITV looks set to fall by 8% in Q1, down from an earlier prognosis of a 3-4% decline.

“Despite bullish headlines about how the UK is faring after the Brexit decision, it seems advertisers, particularly retail and food, are pulling back spend in anticipation of tightened consumer budgets and margin squeeze related to inflation on cost of goods sold,” said Berenberg.

The analysts maintained their negative 5% forecast for the full year, arguing that this is a “realistic, possibly optimistic” view, with consumer spending likely to “become more muted as inflation rises and the reality of Brexit sets in”.

Analysts Sarah Simon, Alastair Reid and Robert Berg argued today that some advertisers may face pressure from inflationary cost increases that they are unable to pass on to consumers, leading them to cut back on discretionary costs such as advertising.

Berenberg’s analysis admits that ITV’s flagship channel has started the year well in terms of year-on-year audience share gain, but holds that the broadcaster’s other channels remain weak. The analysts also note a shift of advertising spend to direct-response and smaller channels, which could playbadly for the commercial broadcaster.

Berenberg maintained its ‘hold’ rating and a price target of 200p.

The news comes soon after ITV announced a plan to close its London Studios, where the likes of Ant & Dec’s Saturday Night Takeaway and The Jonathan Ross Show and BBC One’s The Graham Norton Show are filmed.

Trade union BECTU has described the plan as a “betrayal of staff”. Around 140 staff are reportedly affected by the plan.