UK marketing budgets finally return to 'modest' growth
The fourth quarter of 2019 saw UK marketing budgets return to growth after a stagnant period, signalling a "renewed wave of optimism" for the upcoming year.
According to the latest IPA Bellwether report, published today (15 January), a net balance of +4.0% of firms revised their total marketing budgets higher in Q4 2019.
Although only a "modest" increase, the revision marks a positive pivot for the industry following the "underwhelming" performance seen earlier in the year. The third quarter saw marketing executives observe cuts to their allocated spending for the first time in seven years, down -0.5% - which the IPA blamed on the "underlying tone of hesitancy" that dominated UK business decision making for the most part of 2019.
In Q4 almost a quarter of the Bellwether panel observed budget growth, while 58% reported no change to their spending allocation.
Chart: Revisions to total marketing budgets and business confidence. Source: IPA
Once again, the internet remained the top performing category with a net balance of +7.9% of firms observing budget growth (+11.1% previously).
Meanwhile, main media advertising budgets recorded a small upward revision (+0.5%) following a stationary Q3.
However, all remaining segments recorded spending cuts, led by market research for a second successive quarter (-13.2% from -16.9%). Direct marketing (-7.7% from -7.0%), PR (-7.1% from -4.7%), sales promotions (-3.0% from -2.3%) and events (-1.1% from -5.9%) all continued to register downward budget revisions at the year end.
Chart: Breakdown of revisions to current budgets in Q4. Source: IPA
“There were a number of positives to take from the fourth quarter Bellwether survey. The rise in total marketing budgets provides tentative signs of a momentum shift, particularly when coupled with preliminary data for the 2020/21 budget year," said Joe Hayes, economist at IHS Markit and author of the Bellwether Report.
The early outlook for spending in the upcoming budget year is "promising", according to the report. With panellists expecting to see a bounce in business following the General Election, a net balance of +15.7% of companies expect their total marketing budgets to be upwardly revised, a significant improvement from the 2019/20 forecasts (+3.4%).
"It appears that firms are looking to release the pent-up investment which has been put on hold amid the high degree of political and economic uncertainty which has plagued the UK business climate for well over 12 months now," Hayes added.
“Nevertheless, while these positive developments will perk up enthusiasm for marketing budgets in the coming year, downside risks to the outlook remain at large, particularly if a business cycle recovery does not fully materialise and Brexit uncertainty descends again.”
Looking ahead, the Bellwether expects events marketing to be the strongest area in 2020/21, with a net balance of +11.9% of firms antipating growth.
Main media is also predicted to see "moderate gains" (+6.3%), alongside sales promotions (+2.0%).
Chart: Breakdown of budgets for 2020/21. Source: IPA
As a result, the Bellwether has forecast annual adspend growth of 1.8% in 2020, followed by 2% in 2021, 2.2% in 2022 and 3.1% in 2023.
Commenting on the report, Paul Bainsfair, director general at the IPA, said: “This latest IPA Bellwether Report demonstrates the extent to which UK marketing budget planning has been at the mercy of the unstable political environment. Over the past year we have seen a stagnation in marketing budgets, culminating in a below zero score last quarter.
"With Brexit still looming, I’m sure it won’t be plain sailing, but these forecasts provide an upbeat outlook for the year ahead for UK plc, their marketers and of course the agencies that work with them to grow their businesses.”