Marketing budgets continue to grow but economic confidence dips sharply

While predictions for marketing spend this year are up for the third successive year, the figure is the weakest since early 2013 as marketers’ confidence over the future of the industry drops, according to the latest IPA Bellwether Report.

adspend

The report for the third quarter of 2015 saw 4.4% more companies increase their marketing budgets during Q3 2015. However, this is down noticeably from the 12.2% increase in Q2 2015.

The reduction in Q3 indicates a heightened caution among businesses regarding the slowdown of the UK economy and a drop in confidence around the wider global outlook, according to IPA Bellwether.

Marketers saw their optimism around general economic prospects fall to a nine-quarter low of 6.8%, compared to 13.1% in Q2 2015.

Marketers’ confidence regarding their own financial prospects also eased, with a net balance of 22.4%, compared to 25.3% in Q2 2015, marking a two-and-a-half-year low.

With the Bellwether survey highlighting a slowdown in marketing budget growth in the third quarter of the year, projections for UK ad spend growth this year have also been downgraded. Subsequently, ad spend growth has been cut to 3.7% for 2015 from 4.2% in Q2.

Ad spend per category

Growth was reduced in the majority of ad sectors but some still performed well.

Internet was the best performing category, with 7.8% of marketers planning to up their budgets, an increase from 6.8% in the previous quarter. Spending on search also continued to increase, albeit marginally at 0.6%.

While ad spend on events also registered marginal growth at 2.8% and main media at 0.5%, declines in marketing budgets were seen elsewhere as PR (-5.8%) and market research (-4.7%) recorded the greatest falls, followed by sales promotion (-3.4%) and direct marketing (-2.7%).

Marketers should remain optimistic

Despite the downward revisions in marketing budgets, businesses should remain optimistic, says IPA’s director general Paul Bainsfair.

“As predicted by Bellwether, upward revisions to marketing budgets and confidence are easing. However the important point is they are still positive. More specifically, there are upwards revisions to internet, events and main media advertising budgets in Q3. We are seeing marketers demanding greater accountability, physical presence and share of mind in their planned marketing spend,” he explains.

The slowdown in growth was on the cards, adds Paul Smith, senior economist at Markit.

“As noted in the previous survey, confidence in the financial and economic outlook was already on the wane. Since then, UK growth has softened, while concerns over the outlook in emerging markets and the wider global economy have increased,” he says.

“Focus is therefore probably better placed on the continued expansion in budgets and the welcome news that marketing executives are continuing to adapt a prudent, targeted approach to marketing strategies.”

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