Growth for UK Marketing Budgets Despite Turmoil

In the UK, more firms continue to report growth in marketing budgets than decline, despite the country's soaring cost of living and economic / political uncertainty, according to the IPA Bellwether Report. However, the net positive balance was at its lowest for 18 months.

The report is based on a questionnaire survey of around 300 UK-based companies that provide regular quarterly information on trends in their marketing activities, with a broad variety of respondents (mostly marketing director or equivalent) by sector and geography. Questionnaires for this wave were sent out in the final three weeks of the third quarter, to which the data applies.

The report creates an index figure for each sub-sector of marketing activity by subtracting the proportion of respondents who say spend has decreased from the proportion who say it has increased. The overall index for this quarter was +2.1%, the slowest pace since Q1 2021 and down from +10.8% in Q2, with a revival in events helping generally low figures in other areas. 22.2% of companies reported an increase in total marketing budgets in the third quarter, and 20.1% a decrease.

The slowing reflects the rising costs faced by businesses, squeezing profits and cash made available for investment; while household bills (particularly energy) have dampened consumer spending. Of the seven categories of marketing spend monitored, only events saw growth in Q3, and even here growth slowed notably, from +22.2% in Q2 to +4.5%. Main media marketing budgets, including TV and radio ads, declined with a net balance of -3.1%: within this, published brands (-11.2%) and out of home (-7.6%) performed poorly, and audio also fell slightly (-2.0%), while 'other online advertising' (+9.3%) and video (+8.7%) remained in positive territory.

Among other sectors, sales promotions budgets saw a negative balance (-7.5%); as did public relations budgets (-4.8%); market research (-4.1%) and direct marketing (-0.6%).

In other questions, respondents were understandably less optimistic about the financial prospects for their specific industry (net balance of -44.3% with only 6.3% optimistic); and prospects for respondent's own companies saw a net balance of -27.6%.

Joe Hayes, Senior Economist at S&P Global Market Intelligence and author of the Report said: 'Bellwether survey data suggests that UK companies were able to squeeze out another round of marketing budget growth in the third quarter, although momentum has faded quite significantly since the first half of 2022 as the broader economic picture has darkened. Budget cuts are being seen across the majority of the monitored segments of marketing spend as companies move into retrenchment mode due to soaring costs and slowing demand. The cost-of-living crisis will continue to weigh on household earnings throughout the winter, meaning discretionary spending cutbacks are inevitable for the UK's low-to-middle income groups that are at the heart of the economy'.

The IPA is the professional body representing advertising, media and marketing communications agencies based in the United Kingdom, and is online at 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.