using website header

Connected: Display Connected: Media Landscape Connected: Regional Connected: AV Consumer Surveys Connected: Direct LinkedIn LinkedIn logo icon Twitter Twitter logo icon Youtube Youtube logo icon Flickr Flickr logo icon Instagram Instagram logo icon Mail Mail icon Down arrow
David Pidgeon 

Marketing budget growth 'flatlines' amid Brexit chaos

Marketing budget growth 'flatlines' amid Brexit chaos

UK marketing budget growth finally came to an end in the final quarter of 2018, according the latest IPA Bellwether report, published today.

Although some marketers reported an increase in budgets, this was offset by those observing cuts (a net balance of +16% vs. -16%), thus ending six years of continuous growth. Around two-thirds marketers reported no revision to their total budgets.

The report said there was evidence some marketers still felt some optimism for 2019, with new product launches, expansion into overseas markets, digital transformation and technological development all expected to bring growth opportunities.

However, Brexit chaos has dampened both business and consumer confidence, driving down budgets and restricting marketing resources.

"Company-wide indecisiveness restricted the allocation of resources to marketers, as the wait-and-see approach to how the Brexit process will transpire appears to be the current strategy in place for many UK businesses," said Joe Hayes, Economist at IHS Markit and author of the report.

“The neutral stance on marketing budgets came in tandem with a first pessimistic outlook by businesses towards their own companies’ financial prospects for the first time since 2012, suggesting that top-level belt-tightening and plans to protect margins has seen marketing executives be given less discretion."

Hayes added that provisional data for budgets for the next two years indicates that the downbeat stance seems likely to persist.

The shift towards digital advertising remained apparent during Q4, although growth "moderated noticeably", as signalled by the net balance for Internet falling to +2.1%, from +13.6% in the third quarter (within internet, search/SEO dropped from +5.8% in Q3 to -3.9%, marking the first cut since Q2 2009; mobile advertising budgets were also revised down to -2.4% from +1.9% in Q3).

However, it was budgets for sales promotions that marketing executives enjoyed the greatest upward revisions for, with the net balance increasing to +3.8% from +0.6% in Q3.

Events budgets also saw a slight increase (net balance of +2.6% from -1.1%), however panellists observed cuts to the remaining categories monitored by the Bellwether survey.

The first downward revision for two quarters was seen for main media advertising, which includes large-scale campaigns on TV and in newspapers. The net balance fell to -6.5% from +4.8%.

Direct marketing (-5.6% from -7.4%), market research (-4.7% from - 3.7%), and PR budgets (-4.1% from +4.2%) were also areas of marketing that companies experienced a squeeze on spending.

With the Office for Budget Responsibility (OBR) lowering its forecasts for consumer spending, business investment and ultimately GDP, Bellwether predicts "softer adspend growth" for 2018.

Adding to the Brexit-related risks during the latest quarter were challenging business conditions across key export markets in Europe, particularly France and Germany. The Bellwether Report has subsequently cut its projection for adspend growth to just 0.5% for 2018, down from 1.1%. However, if the relationship between the UK and EU becomes clearer, this should improve marketing budgets.

“In uncertain political and economic times such as these, the understandable reaction for some advertisers is to lose confidence in brand building advertising and to think short term even to the point of heavily discounting their products and services," said Paul Bainsfair, director general at the IPA.

"We’ve seen this on and offline in the run up to Christmas - and now see the impact in black and white in this latest Bellwether Report. We know from the research we have done into what builds and what destroys brands - and it is proven - that too much short-term sales promotion activity destroys brand value in the long term. Marketers need to weather this turbulent period and think ahead."

Leave a comment

Thank you for your comment - a copy has now been sent to the Mediatel Newsline team who will review it shortly. Please note that the editor may edit your comment before publication.