Marketing budgets hit record levels in 2014 but Bellwether warns of headwinds

Meanwhile, the uncertainly of the unpredictable political in the UK and the EuroZone could be tempering optimism at the start of 2015.

The IPA Bellwether Report for the fourth quarter of 2014, released today (15 January), showed that 6.1% of companies had registered an increase in budgets during the quarter, though this was down from 12.6% in the third quarter of 2014 and the lowest rate since the first quarter of 2013.

Media performance

The highest increase in the fourth quarter was on online channels with growth of 15.1%, up from 14.5% in third quarter and the largest budget growth since the second quarter of 2013. Search also saw an increase of 15.7%, up from 9.4% in the third quarter of 2014, marking 22 consecutive quarters of growth.

Main media – TV, radio and press, for example advertising (6.7%), PR (6.6%), direct marketing (3.9%), events (2.4%), sales promotion (2.4%) and market research (0.6%) also recorded increases.

Outlook for 2015

Looking forward, in terms of spend; budgets for 2015/16 have been set at the highest level in eight years, with companies expecting a rise in their marketing budgets.

Chris Williamson, author of the Bellwether report and chief economist at Markit, says: “The further upward revision to budgets at the end of last year rounds off what looks to have been the best year in terms of marketing expenditure growth in the history of the Bellwether report, and 2015 could be even better. The planned increase in marketing budgets for the coming year is more aggressive than anything we’ve seen since data were first collected back in 2000.”

Thirty per cent of companies are anticipating a rise in their marketing budgets in 2015/16 relative to 2014/15 levels according to the report, with events, PR and main media expected to benefit most from the uplift.

The report also predicts 4.1% growth in UK ad spend in 2015.

However, the Advertising Association and the World Research Advertising Center (WARC) predicted growth of 5.7% for 2015 earlier this week, which is down from the 6.5% forecast last year. Their report forecast spend will be lower across all advertising sector, including TV, radio, Internet and mobile, with higher growth only expected for digital news and magazine brands, broadcaster VOD and cinema.

They have also adjusted predictions for their 2014 results, which will be released in May, from 6.4% to 5.8%.

Election uncertainty could affect budgets

The slowing growth may be a reflection of heightened caution towards a the unsettled wider economy, although optimism towards the future financial prospects of companies has improved since last quarter, with 30.7% of companies growing more optimistic compared to three months ago, according to the Bellwether Report. This figure, however, is down from 38.6% in 2014.

“It’s clear that business optimism has cooled,” Williamson says. “Given the upcoming general election, the likelihood of interest rates starting to rise in 2015 and ongoing worries about the Eurozone, it’s not surprising that we are seeing companies report increased uncertainty about the year ahead. We’re therefore forecasting a further solid rise in marketing and advertising spend in 2015, but expect that 2014 will prove to have been the high-water mark in terms of growth in the current upturn.”

Paul Bainsfair, IPA director general says that in the long run, maintaining share of voice will drive brand growth and win market share.

“While it is inevitable that the current wider economic uncertainty and geopolitical unrest is starting to impact decisions regarding marketing budgets, it will be interesting to see which companies will weather this best,” he says.