Q4 fails to stem marketing spend free-fall but get ready for 'roaring 20s', says IPA
A new variant of the Covid-19 coronavirus, together with uncertainty caused by a Brexit trade deal, only negotiated beyond the transition deadline, resulted in another sharp decline in UK advertising budgets during the final quarter of 2020, according to the latest IPA Bellwether Report.
Overall, only 16.4% of UK firms noted an increase in available funds between October and December 2020, which was heavily outweighed by the 40.4% that experienced a decline.
Compared with Q3 however, the erosion of UK marketing budgets continues to soften and the situation is still gradually improving.
Between July and September 2020, over half of respondents (52.6%) had recorded a decrease in budgets from the previous three months ago, compared to only 11.6% that saw an increase.
Breaking down the Main Media Advertising category for Q4, out-of-home remained the worst performing category at -36.7% (up from -50.0% in Q3); followed by published brands at -29.0% (up from -38.5% in Q3); audio at -21.6% (up from -32.0% in Q3); and video at -3.5% (up from -16.1%).
‘Other online’ was the only category within Main Media to record a positive net balance revision, at +0.7%, up from -6.5% in Q3.
Broken down by marketing category, events were the most severely impacted in the latest survey period, with a net balance of -62.9% of firms recording a decrease in available spend, compared with -64.1% in Q3.
Budgets for ‘other’ marketing (-29.6% vs -40.2% in Q3), sales promotions (-26.5% vs 36.0% in Q3), market research (-25.0% vs -32.6% in Q3), direct marketing (-13.9% vs -25.3% in Q3) and public relations (-8.5% vs -31.4% in Q3) also continued to fall during the final quarter.
Looking forward, the preliminary outlook for ad-spending in 2021/2022 suggests that budgets are likely to recover in the upcoming financial year.
A net balance of +12.0% of UK firms expect their total marketing budgets to be upwardly revised. If realised, they would represent a significant turnaround from the steep declines seen throughout 2020.
Overall, for the UK economy, Bellwether author, IHS Markit anticipates that the swift commencement of Covid-19 immunisation programmes will see a +3.5% expansion of GDP in 2021, predominantly supported by strong growth in the second half of the year, followed by a +4.9% increase in 2022.
Assuming that economic conditions recover as expected, IHS Markit also forecasts robust ad-spending growth of +6.9% in 2021 and +6.2% in 2022.
Downside risks to these positive forecasts include possible delays in the UK’s vaccine rollout and slow uptake of immunisation programmes in other countries, which could hinder trade.
Paul Bainsfair, IPA director general said: “It is no surprise that Q4 sees UK marketing budgets remain in negative territory. We are still in the grip of the pandemic and the impact of Brexit is uncertain, with some marketers citing concerns regarding the potential for tariffs, and increased paperwork, delays and costs. While the situation remains bleak for now, the Q4 2020 report does, however, reveal significant promise of green shoots ahead.
“Budget plans for 2021/2022 are into positive territory. As the vaccination roll-out continues, as the lockdowns begin to ease and as firms adapt to post-Brexit rules, perhaps we can dare to ready ourselves for the roaring twenties after all. Those brands that have withstood the storm, kept their voices heard and their subsequent market share up, will be the ones consumers turn to first in the good times.”