UK marketing budgets ‘paralysed’ by economic uncertainty
Hard to quantify impacts of the Brexit negotiations and Britain’s future departure from the EU have been given as the primary reasons for UK companies making no changes to their marketing budgets this quarter – coupled with reports of reduced sales and investment and a desire to keep costs lean.
According to the latest IPA Bellwether report, published today (18 October), 69% of UK companies kept their budgets the same in Q3 2017 as the previous quarter – 12% higher than in Q2.
Around 21% of the survey panel made an upward revision to their marketing budget, while 11% of companies recorded a cut – resulting in a +9.9% net balance increase to budgets overall and the lowest reading since the first quarter of 2016.
Muted growth in adpsend predicted for 2017
The report predicts only a 0.6% increase in adspend for 2017, and with the economy expected to slow further in 2018 with GDP growth forecast at just 1.6%, Bellwether anticipates a stagnation of adspend in 2018.
However, as investment, consumption and wider growth improve in 2019/2020, adspend is forecast to rise at similarly quicker rates, with predicted increases in adspend of 1.8% and 2.3%, respectively, in 2019 and 2020.
Internet budgets increase as main media spend remains unchanged
A net balance of +17% of companies increased their internet budgets – although this was lower than the previous quarter’s decade high of +22.7%.
By contrast, main media advertising recorded no change at all – down markedly from +9.8% in Q2 2017.
Sales promotion and direct marketing categories also recorded no change during the third quarter; however, this was an improvement on Q2 when the net balances were -10.7% and -4.7%, respectively.
Market research was the only Bellwether category to register a net reduction in spending during Q3 (-2.4%), while events (+9.4%), PR (+7.2%) and ‘other’ (+2.3%) were all up on the previous quarter.
In response to the results, Paul Bainsfair, IPA director general, has warned marketers against investing increasing amounts of spend in online advertising at the expense of other media.
“Recent evidence has revealed that the most effective way to attract more customers is through increasing market penetration,” he said. “Furthermore, the most effective approach to achieving this is through using a 60:40 ratio of brand-building, mass media, supported by more targeted sales activation media.
“So while we acknowledge the benefits of internet advertising and welcome the growth in internet advertising budgets, we wouldn’t recommend sole investment in online at the expense of offline. A careful balance is required.”
Financial prospects ‘historically subdued’
When asked to consider their optimism regarding financial prospects for their industry compared to three months ago, nearly 24% of UK marketers were less confident, compared to around 15% that had become more optimistic.
Although the resulting net balance of -8.2% was an improvement on the -12.6% seen during Q2, the latest data marks the seventh successive quarter that a negative net balance has been registered.
Companies were slightly more optimistic about their own financial prospects in Q3 2017, with just over 29% of the survey panel growing more confident, compared to 18% that are less optimistic.
However, the report notes that optimism remains ‘historically subdued’ and well below the post financial-crisis average.