Brexit uncertainty is continuing to take its toll on marketing budgets, according to the latest IPA Bellwether Report, which shows that even though spend rose during the third quarter of 2018 – extending the current period of growth to six years – it was at the slowest pace in nearly three years.
Almost 21% of panel members revised total marketing budgets up in Q3, while around 18% observed a decline in spending plans, yielding an overall net balance of +2.5%.
While direct marketing budgets were revised down (-7.4%), this was compensated by digital marketing, which drove yet another strong expansion in Internet-based campaigns during Q3, as signalled by a +13.6% net balance of firms observing upward budget revisions. The finer details also revealed that search/SEO and mobile marketing budgets also received boosts (net balance of +5.8% and +1.9% reporting higher expenditure respectively).
The net balance of firms observing budget increases for main media advertising was broadly unchanged from the preceding quarter at +4.9% (+4.8% in Q2).
Elsewhere, other categories of the Bellwether survey to record budget growth included PR (+4.2%) and sales promotions (+0.6%).
As part of the Bellwether survey, panellists were asked about their assessment of financial prospects for their own companies and then for their industry as a whole. A net balance of +5.7% were optimistic towards their own company’s outlook, compared to three months ago. Although this signals a general upbeat view, it was notably weaker than that seen in Q2 (+13.3%) and the most downbeat assessment in six years.
Casting their views for the wider-industry, panellists were substantially more pessimistic than in recent surveys. The net balance fell in Q3 to -21.0%, from -9.0% in the second quarter, signalling the strongest level of negative sentiment since Q4 2011 (-44.9%).
With the Office for Budget Responsibility (OBR) yet to revise their forecasts for the UK economy since the Q2 Bellwether survey, the Report’s UK adspend growth projections are unchanged.
The Bellwether estimates adspend to rise 1.1% on the year. A lack of clarity over the UK’s future relationship with the EU after Brexit, alongside rising cost pressures, will both act as drags on marketing expenditure.
Looking to 2019, aside from the Brexit-related risks, adspend growth is also likely to be affected by slower growth and muted consumer spending. As such, Bellwether estimates adspend growth of 0.7% for next year, but a pick-up in growth momentum from 2020 through to 2022 supports the view that advertising expenditure will improve at a quicker rate at the start of the next decade.
IPA director general Paul Bainsfair said: “With ongoing Brexit uncertainty, it is perhaps no wonder that companies are having to be more cautious with their marketing spend and are inevitably increasingly downcast about their financial prospects.
“At a time when just under two-thirds are pressing pause on their marketing spend, perhaps this provides an opportunity for others to get cut-through and see whether fortune really does favour the brave.”
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