Marketing budgets recover but the future looks ‘subdued’
After flatlining in the final quarter of 2018, UK marketing budget growth has bounced back to its highest level in a year and a half, according to the latest IPA Bellwether report published today.
The net balance of marketing executives reporting upwardly revised budgets increased to +8.7% in the first quarter of 2019, with around 21.6% of members having observed spending growth, compared to 12.8% reporting budget cuts.
“A return to growth in marketing budgets during the opening quarter of 2019 may come as a surprise given the uncertainty that shrouds the UK political and economic climate has only built further since the previous Bellwether Report,” said Joe Hayes, economist at IHS Markit and author of the report.
“However, some companies began to show a determination to step up brand-building and protection in these challenging times, taking a pro-active, yet defensive approach in the face of business belt-tightening and weakening consumer confidence.”
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Panellists did observe budget cuts to some categories monitored by the Bellwether survey, including market research, sales promotions and direct marketing (with net balances of -4.2%, -3.7% and -3.5%, respectively) – which the report attributed to “caution” prompted by unfavourable global economic conditions, coupled with fears of falling business and consumer confidence.
However, other categories saw marked upward revisions to their budgets.
Digital advertising continued as the report’s best performing category, with the net balance for internet jumping from +2.1% in Q4 2018 to +17.2% in Q1 2019. Within internet, search/SEO grew from -3.9% to +14.2%, while targeted advertising on mobile was revised up to +3.6% from -2.4%.
Meanwhile, main media marketing – which includes large-scale campaigns on TV and in newspapers – returned to growth, up to +5.2% in Q1 from -6.2% in Q4. Events also continued to register expenditure growth (net balance of +3.4% from +2.6%).
Marketing budget breakdown for Q1 2019
“That said, cautious undertones were still apparent in budget plans for the 2019/20 financial year, with panellists providing only modest growth expectations in available marketing spend,” Hayes added.
“In fact, the outlook was the most subdued since 2009.”
Almost three quarters of panellists said they expected cuts or no change to budgets in the coming financial year. A net balance of +3.4% anticipate budgets to grow during the 2019/20 period; this time last year, a net balance of +18% of firms anticipated budget growth for 2018/19.
According to the report, positive expectations for the year ahead centred on main media marketing campaigns and advertising at events (+4.8% and +2.5%, respectively), as companies look to “defend their brand” and “stave off tough competitive pressures”.
Marketing budget forecasts for the 2019/20 period
With the Office for Budget Responsibility (OBR) having downwardly revised its 2019 growth projections for consumer spending by 0.4% since October, the Bellwether is forecasting a “modest” 1.1% annual expansion to adspend this year, compared to 1.3% previously.
However, it is assumed that investment and consumption will bounce back once Brexit uncertainty lifts and consumer confidence is restored.
Paul Bainsfair, IPA director general, said the Bellwether’s findings for Q1 2019 signal a “much-needed kiss of life” for UK marketing budgets.
“The smart marketers realise that to grow their businesses, they must invest in them, particularly in mass reach, long-term media,” he said.
“While the forecast for the year ahead remains uncertain given the seemingly endless Brexit negotiations, those that want real competitive advantage should follow the proven rule that if you increase your share of voice above your share of market, you should expect to experience growth.”