Marketing Budget Cuts 'Slowing'

The IPA's latest Bellwether survey has found that for the second quarter in a row, the rate of decline in marketing spend has eased, with one in three companies now reporting that their financial prospects have improved compared to one in four reporting a deterioration.

Spend was reduced for all categories of marketing in Q2, but the rate of decline was slower than in Q1. Budgets for main media advertising and 'all other' (including market research, PR, and event sponsorship) were again hardest hit amongst those companies surveyed.

The report, compiled by Markit Economics, shows that marketing budgets were revised down in Q2 for the seventh quarter running. However, the scale of the downward revision eased for the second quarter in a row from the nine year survey record seen in Q4 of last year: however, the IPA says the rate of decline remained severe.

Just 10% of companies surveyed revised their 2009 marketing budgets upwars, whereas 38% reported a reduction. With 2009 budgets having been set lower than 2008 at the start of the year, this downward revision to budgets in Q2 raises the risk of marketing spend falling in 2009 even more than in 2008.

The reduced incidence of budget trimming in Q2 was linked to an improvement in business confidence, with companies surveyed reporting that their financial prospects had improved for the first time since the first quarter of last year.

Companies were less up-beat about prospects for their industries as a whole, but even here pessimism eased to the lowest since Q3 2007. The IPA says these factors combine to give hope that the UK recession peaked in Q1, and that the rate of decline of gross domestic product will have eased in Q2 from the fifty-year record 2.4% drop seen in Q1.

'To anyone optimistically inclined, theApril Bellwether seemed to signal the bottom of the market, and the new report suggests that the worst is over,' says Rory Sutherland, IPA President and Vice- Chairman of Ogilvy Group UK. 'Budget cutting for all marketing communications categories seems to be slowing and, while the economy is still tough, the balance of executives reporting improved prospects moved into positive territory for the first time since Q1 2008.'

The Bellwether Report, which was first published in 2000, draws data from a panel of around 300 UK marketing professionals.

Web sites: www.ipa.co.uk and www.markit.com .

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.