IPA Bellwether: Financial confidence wanes in wake of Brexit
The uncertain economic and political climate has continued to weigh on industry financial prospects, according to the latest IPA Bellwether report, with a net balance of -14.6% of companies signalling a deterioration in their confidence in the final quarter of 2016. This is down on Q3’s -12.1% and the lowest level recorded for four years.
However, businesses retained a reasonable degree of confidence regarding their own company prospects, with the respective net balance edging up slightly in the fourth quarter to +11.2%, from +10.6% in Q3.
The number of companies registering an increase to their budgets decreased slightly in Q4 (+12.9%) – ending the nine-quarter high recorded in Q3 (+13.4%).
Looking ahead to 2017/18 budget plans, UK marketers have indicated a positive outlook, with a net balance of +27.6% of companies signalling growth in their total budgets for the coming year.
Adspend forecast growth
Following a strong rise in economic activity at the end of 2016, which has resulted in a 2.1% increase in GDP, Bellwether is now anticipating adspend to rise by 2.1% in 2016, up from Q3’s estimate of 1.9%; and by 0.7% for 2018, up from Q3’s estimate of 0.2%.
However, Bellwether has forecast a fall during 2017. Uncertainty over the impact of the negotiations of the UK’s terms of EU withdrawal is likely to drag on investment, while consumer spending is forecast to rise at a much slower rate.
The result is a projected -0.7% annual fall in adspend during 2017, unchanged from Q3’s estimate.
By sector
Once again, the events sector recorded the strongest upward revision to budgets of all the Bellwether categories, with a net balance of +12.3%, up from +9.9% in Q3.
Internet also continued to gain an increasing share in the marketing mix of companies, recording a net balance of +12.1% for Q4 2016 – the best reading for two years.
Within internet, mobile advertising increased, recording a net balance of +3.9% compared to -2.6% in the preceding quarter; while internet search/SEO recorded a net balance of +7.1%, down slightly on Q3’s 7.3%.
Main media advertising began to recover in Q4, with the respective net balance rising to +5.1% from -3.8% in Q3.
In contrast, sales promotions (-1.8%) and market research (-2.5%) both recorded declines, while budgets related to direct marketing (0%) were unmoved since the previous quarter.
“It’s fair to say that after the relatively more pessimistic outlook painted by the Q3 Bellwether report, the latest edition could be viewed as somewhat of a surprise particularly in regards to the main media category. Whilst the Q4 report signals a record run of growth extending over four years, the Q3 publication indicated a net balance decline of about 4% for the main media category,” said Tom George, chairman UK and Northern Europe EMEA, MEC and chair of the IPA Media Futures Group.
“Our own GroupM forecasts supported this pessimism as we revised down our forecasts in line with this sentiment. However, in line with this latest report, we have raised our growth figures to 7.2% year-on-year increase in ad expenditure.
“The difficulties faced by the print medium are well documented as is the resilience of television but paid search continues to grow as does digital display probably because of the focus on conquering the TV territory. Pure play internet is also a big growth driver with Google and Facebook capturing the majority of all growth (and seemingly impervious to the recently reported errors in measurement in the case of Facebook).”
Greg Endean, commercial director at Sociomantic, said: “Towards the end of 2016, we saw advertisers, technology firms and consumers forge ahead despite ongoing political and economic uncertainties, both at home and across the Atlantic. IPA Bellwether’s Q4 2016 report confirms that advertisers had ‘markedly’ raised their marketing budgets – a prudent move should they miss out during the most competitive season of the year.
“Likewise, several tech firms displayed confidence in commercial prospects by increasing investment. Companies like Snap (Snapchat’s parent company) recently announced that it is setting up shop in London as its European headquarters. Similarly, Google is expanding its London base to a colossal scale that it is creating over 3000 new jobs in the capital.
“Finally, what we’re seeing in the programmatic space is reflective of IPA Bellwether’s report, with advertisers increasing spend in the ‘internet’ sector, pushing towards online channels that deliver ROI. They know that thanks to programmatic technologies, marketing budgets can be held accountable. And indeed, proving that consumers also hadn’t shied away from spending, we saw positive results for many of our partners as 2016 drew to a close.”