Boris Johnson’s “oven ready” Brexit deal could yet prove half-baked but the advertising and marketing industry has certainly swallowed it whole, with the latest IPA Bellwether Report showing a return to adspend growth, albeit for the seemingly unstoppable digital juggernaut.
According to the results of the Q4 study, there are “fresh signs of optimism for UK marketing expenditure”, with data showing “modest” growth for the first time since the start of 2019.
This is compared with stagnant spending activity in the two previous quarters, which had been blamed on uncertainty, client hesitancy and weak confidence, leading to a subdued business climate and delayed decision making.
Although the Bellwether’s methodology has been widely reported, it is worth repeating as it is unique within the sector. Based on a questionnaire survey of around 300 UK companies, the panel reveals whether their allotted marketing budget for each discipline has either gone up, down or stayed the same. An increase is of course welcomed, and a fall less so but if spend stays the same it is hardly a disaster.
According to the latest survey, a net balance of +4.0% of firms revised their total marketing budgets higher in the fourth quarter (up from -0.5% in the third quarter). This was the strongest expansion since the start of last year, but indicative of a modest increase. Approximately 23% of companies observed budget growth, while around 19% reported cuts, leaving the remaining 58% with an unchanged spending allocation.
The breakdown by Bellwether category showed that Internet retained its status as top performer (net balance of +7.9% from +11.1% in Q3), while there was a fractional upward revision to main media advertising (+0.5% from 0%). All remaining segments recorded spending cuts, led by market research for a second successive quarter (-13.2% from -16.9%), PR (-7.1% from -4.7%), sales promotion (-3.0% from -2.3%) and events (-1.1% from -5.9%).
Direct marketing – which comes under the narrow definition of direct mail, email, telemarketing, door-to-door, catalogues and SMS – continues to suffer (-7.7% from -7.0% in Q3) although few in the DM industry would agree.
However, looking towards this year, the report predicts that conditions for marketing spend will be far more favourable.
It states: “A key hindrance for the UK in recent times has been the lack of a Government with a working majority. With this layer of uncertainty now removed following the General Election, panel comments suggest that businesses have become more inclined to invest and spend. As such, Bellwether predicts 2020 will be a stronger year than 2019 and it forecasts annual adspend growth of 1.8%.
“There also appears to be a strong likelihood that the business cycle will kick on beyond 2020. As such, Bellwether anticipates adspend growth to improve in 2021 (2.0%) and beyond (2.2% for 2022 and 3.1% for 2023).”
Bellwether Report author Joe Hayes, who is also an economist at IHS Markit, said: “There were a number of positives to take from the fourth quarter Bellwether survey. The rise in total marketing budgets provides tentative signs of a momentum shift, particularly when coupled with preliminary data for the 2020/21 budget year.
“It appears that firms are looking to release the pent-up investment which has been put on hold amid the high degree of political and economic uncertainty which has plagued the UK business climate for well over 12 months now.
“Nevertheless, while these positive developments will perk up enthusiasm for marketing budgets in the coming year, downside risks to the outlook remain at large, particularly if a business cycle recovery does not fully materialise and Brexit uncertainty descends again.”
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