Bellwether: Marketing spend revised up at highest rate in almost six years

The latest IPA Bellwether survey, published today, shows a sharp upward revision in marketing budgets in Q2 2013 – the highest rise in almost six years.

Businesses have recently sought to take advantage of improving economic conditions by supporting sales efforts and new product launches. With 22% of companies reporting an upward revision to their marketing budgets during the latest survey period, compared to 15% that indicated trimming, the resulting net balance of 7.3% was the highest since Q3 2007.

The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.

According to the report, the positive showing for Q2 will bolster hopes that the sustained period of marketing cuts that have been evident since the beginning of the financial crisis will come to an end this year.

A net balance of 13.5% of companies have pencilled in a net increase in marketing budgets during 2013 as a whole – the most positive forecast for two years.

The marked upward revision to total marketing budgets in Q2 was accompanied by growing confidence amongst companies regarding their financial prospects. The report found that companies are at their most upbeat since Q3 2009, with a net balance of 27.6% being a significant improvement on Q1’s +16.8%.

The evidence provided in the Q2 2013 report adds to evidence that the UK economy is strengthening as it heads into the second half of 2013.

Business surveys have already signalled that GDP growth is strengthening in Q2, with the economy set to expand at a quarterly rate of 0.5%. This will strengthen hopes that 2013 will prove to be a much better year for economic growth than expected and lead to further upward revisions in marketing budgets as the year progresses.

By sector, data has shown that the Internet remains the key driver to overall budget growth – a net balance of 17.4%, compared with 8.9% for Q1 2013, and the best reading since 2010.

A further four categories also registered upward revisions to budgets led by PR, a recent addition to the survey, with a net balance of 3.4% – the highest in three quarters of data collection.

Sales promotion (2%), main media advertising (1.9%) and direct marketing (0.6%) also recorded upward budget revisions. Market research budgets were unchanged, while there were falls seen in ‘other’ (-3.2%) and events (-0.9%).

“This is very encouraging; with the upward revision of marketing spend in Q2 the highest for almost six years,” said Paul Bainsfair, director general IPA.

“Companies are beginning to shake off the cloak of recession and are becoming more confident in the economy. This bodes extremely well for continued growth in marketing spend for the rest of 2013. These figures should send a very upbeat message to the wider economy.”

Chris Williamson chief economist at Markit and author of the Bellwether report said that the second quarter is looking like one of the best since the onset of the financial crisis in terms of a positive signal for marketing budgets and the wider economy.

“The latest Bellwether survey shows companies taking an increasingly aggressive stance with regard to boosting their marketing expenditure, which in turn reflects their views on financial prospects having improved dramatically over the course of the year to date,” he said.

Williamson added that with marketing spend being a key barometer of the health of the economy, not only is GDP growth likely to accelerate in the second quarter, but the Office for Budget Responsibility’s official forecast of 0.6% economic growth this year is beginning to look pessimistic.

Jane Ratcliffe, member of the IPA Media Futures Group and chairman, Mediacom, said: “Marketing directors are being given the chance to spread their wings again, with budgets gradually increasing and new product development in the pipeline.

“If we can maintain this sort of confidence, creativity will prevail and that’s when we’ll see consumer confidence and spending grow, fuelling the whole economy. It’s been a tough five years but we’ve all learnt how to adapt to change, which will help the marketing industry to be more resilient in the future.”