Caution the watchword as marketing budgets slip back into reverse gear

Quarterly survey reveals that 20% of marketers adjusted spend downwards in three months to 30 June.

The fragile nature of the recovery in the marketing industry has been highlighted by the latest Bellwether report, which found that marketing budgets were revised down in the second quarter.

The quarterly survey, carried out by Markit Economics on behalf of the IPA and BDO, shows almost 20% of those polled adjusted spend downwards in the three months to 30 June compared with 15% that noted a spending increase, a net balance of 4.6%.

The reverse comes as a blow following the rise of 4.5% Bellwether uncovered in the first quarter when marketing budgets increased for the firsttime since the global economic crisis started.

Confidence among those polled also dipped. A greater proportion of executives surveyed were more pessimistic about the financial prospects of their company than they had been at the start of the calendar year, up to 25% from 20% in the first quarter. The number feeling confident remained the same at about 41%.

Direct marketing, internet and internet search were the only media channels forecast to increase, according to Bellwether, with the net balance of those predicting an uplift of 1.2%, 10.1% and 6.6% respectively.

However, marketers in sales promotion expect to experience a drop of 11.5%.

Chris Williamson, chief economist at Markit and author of the Bellwether report, says the downward revision was “disappointing” following the uplift seen in the first quarter.

“Companies are exercising increased caution in their expenditure in the face of likely slower economic growth in the second half of the year,” he adds.

Many observers fear that the UK economy could be hit again in the next year after VAT increases to 20% in January and the extent of job cuts in the public sector becomes known.

Despite the gloomier picture painted by Bellwether, other recent evidence suggests that advertising spend will increase this year. The latest Advertising Association/Warc data predicted overall market growth of 3.3% in 2010.

Commenting on Bellwether, IPA president and vice-chairman of Ogilvy Group UK Rory Sutherland says: “The cautious approach shown by marketers in the second quarter of 2010 is understandable given the uncertain nature of the UK economy.”

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