Growth in UK advertising spend looks “likely” to have peaked following a period of record growth, according to the Institution of Practitioners in Advertising (IPA) in its third quarter 2007 Bellwether Report.
Strong sales and healthy profits encouraged companies to boost marketing spend again in the sector, according to the report. The largest gains were seen in the business and consumer services sectors, with retailers also recording higher budgets.
The report says that there were signs of budgets being trimmed, notably from financial services providers and the automobile sector, as a result of the credit squeeze. Manufacturers are also suffering with high oil prices, it adds. The industrial sector reported a reduction in spend, linked to cost cutting.
Chris Williamson, author of the Bellwether Report, says: “It will no doubt take some time for the full effects of the banking crisis to be felt, so it is likely that these strong Q3 numbers represent a peak in the cycle.”
Main media advertising, which includes TV, press, radio, cinema and internet, rose 9.2%, compared to 6.2% last quarter. The rise also indicates the sector has recovered compared to a 1.1% decrease year-on-year.
The sustained above average growth of internet spend means the Web now accounts for over 6% of marketing spend. However, direct marketing suffered as a result and was the only category to see a decrease in budgets. The drop of 0.5% is the first direct marketing downward revision since the first quarter of 2006.
Moray MacLennan, IPA president and M&C Saatchi chairman, warns that the real evidence of how the upheaval in the financial markets had impacted the industry would become clear in the next quarter.
However, Aegis group chief executive Robert Lerwill says 2007 is “still on track to break records”.