UK Marketing Spend Growth Slows, MR Props Up Table

Total UK marketing budgets continued to grow at a solid pace in the second quarter of 2022, according to the latest Bellwether Report from ad association the IPA; but market research was not among the gainers, with budgets falling for a net 6.5% of companies.

The Bellwether is based on a questionnaire survey of around 300 of the top 1,000 UK-based companies, providing regular quarterly information on trends in their marketing activities. Respondents are primarily marketing directors or similar, and questionnaires are dispatched to companies in the final three weeks of each calendar quarter. Spending forecast indexes are calculated by taking the percentage of companies who expect budgets to fall away from the percentage who expect them to rise, so they do not indicate the likely amount of cuts or increases, but over time give a respectable indicator of trends.

Overall, around a quarter (24.2%) of surveyed companies raised their total marketing expenditure during the second quarter, while 13.4% registered budget cuts, resulting in a headline index of +10.8%, slightly below the Q1 figure of +14.1%. This is boosted by the predictable recovery in the events sector - net +22.2% - while public relations was the only other sub-sector to see a rise in Q2, up to +3.7% from +0.6%.

Marketing budgets for main media - which includes big-ticket advertising campaigns relating to TV - stagnated: the balance was 0.0%, down from +9.4% in Q1. Within this, video advertising lost most of its momentum (+0.8% from +9.0%), while audio (-16.4%, from -8.5%) and out of home (-15.9%, from -4.6%) saw downturns deepen. Market research fell to -6.5% from -3.5% in Q1, and only the 'other marketing activities not already accounted for' category fell more steeply (-8.3% vs. -0.9%).

In other findings, respondents were pessimistic towards their industry-wide financial prospects, with a net balance of -26.7% expecting them to deteriorate: 13.6% of companies were more optimistic, 40.3% pessimistic. Looking at prospects for their own companies, 30.7% of survey respondents expected a downturn while 21.2 said they would improve: the first time since Q3 2020 that the net balance was negative (-9.5%).

Pessimism reflects economic woes with high inflation, relatively low consumer confidence and 'high costs for businesses', according to the report, while rising interest rates act to deter investment. The IPA has cut its adspend forecast for this year to a 1.6% increase, from 3.5% previously.

Paul Bainsfair, IPA Director General, says 'marketers are understandably concerned about the challenging business climate ahead, as reflected in the deterioration of their financial prospects. It is interesting to see, however, amid the mounting economic headwinds, there were a number of businesses that signalled their intent to market aggressively to support their brand and gain market share from less-prepared competitors. This is usually a wise and canny move. All the IPA's analysis on who does best in a downturn, shows that the companies that recover fastest are the ones that either maintain or increase their marketing spend during difficult economic times. Equally, cutting ad budgets - relative to competitors' spend - in a recession undermines companies' ability to grow future market share and profits'.

Report author Joe Hayes, Senior Economist at S&P Global Market Intelligence, says the stagnation in main media marketing budgets is 'a disappointing result... and suggests concerns around the outlook are weighing on decision making'.

Commenting on results for the Market Research sector Bill Doris, VP Analytics, EMEA at MediaCom & IPA Media Research Advisory Group Chair states: 'Whilst the market research sector might expect some downward revision to budgets in the near future, it has never been as important to understand the impact of the changing economic climate on consumers and the impact on their relationship with brands. Brands that continue to invest in understanding changing consumer behaviour at this critical time will be best placed to adapt their marketing strategies and garner rewards accordingly'.

Web site: www.ipa.co.uk .

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