Marketing budgets cut as confidence drops

Almost a quarter of companies cut their marketing budgets in the second quarter as they looked to bolster profit amid continuing concern over the state of the economy, according to the latest Bellwether report.

About 22% of the 300 marketers polled reported a decline in total spend in the three months to 30 June. A fifth (20%) reported an increase.

Confidence among the marketers surveyed about the prospects for their own companies was at its lowest ebb for more than two years.

Almost a third (31%) reported greater optimism than that felt in the first quarter but 28% said confidence was weaker. The net balance of 3.3% was down from the 12.8% reported in the first quarter of 2009.

Marketers’ confidence in the prospects for their sectors also dipped. A third (31%) reported deteriorating confidence in outlook for their sectors, with 22% growing more optimistic.

Chris Williamson, chief economist at Markit and author of the Bellwether, says the drop in budgets came as “companies sought to cut costs in the face of weak demand and lower than anticipated sales revenues.”

UK economic growth remains sluggish, growing at just 0.5% in the first quarter, according to the Office of National Statistics, while households’ disposable income suffered its biggest drop since 1977, the ONS said in March.

Nicola Mendelsohn, IPA President, says: ““The economy is going sideways and this seems to be the way it is going in the advertising marketplace too. The decline in confidence doesn’t augur well, but is not surprising amidst a continuing climate of concern surrounding the financial and political outlook both at home and internationally.”

Despite the majority of marketers reporting budget cuts, the net balance of -2.1% was an improvement on the -5.1% reported in the first quarter.

The outlook for 2011 is also cause for optimism, claims BDO LLP’s head of media Andy Viner, with the 2012 Olympic Games providing a “welcome fillip”.

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