Direct marketing purrs like a Roller as adland splutters

UK marketing budgets witnessed a robust rebound in Q2 2025, according to the latest IPA Bellwether Report, reversing Q1’s decline, but while adland continues to perform like a clapped out old banger, direct marketing is more like a classic Rolls-Royce, with a sustained sequence of growth stretching back ten quarters to January 2023.

Overall, the report highlights how firms adopted a resilient mindset and expanded their marketing expenditure, despite the challenges stemming from geopolitical and economic uncertainty, increased operational costs following April’s tax changes, as well as a general lack of confidence across the marketplace.

In fact, a net balance of +5.5% of panellists reported a rise in their total marketing budgets for the second quarter of 2025, a notable improvement from -4.8% in the prior quarter. The uptick in budgets was historically strong and the most significant since Q2 2024. Underlying data indicated that 22.7% of panellists registered a rise, compared to 17.2% reporting a reduction in their budgets.

A breakdown of spending plans revealed that marketing executives raised their expenditures for sales promotions and direct marketing to the greatest degrees, with the respective net balances rising from +8.0% in Q1 to +9.4% in Q2 and from +9.0% in Q1 to +9.1% in Q2.

Marketing budgets were also raised for events and public relations, although both segments recorded a slight decline in their respective net balances, from +5.4% in Q1 to +3.9% in Q2 and +3.4% in Q1 to +2.7% in Q2.

However, after signalling a reduction in the previous two quarters, budgets for the main media category – which is dominated by big-ticket TV advertising – remained flat on the quarter at 0.0% (net balance at -6.7% previously).

Ad agencies has always argued that “brand advertising” is far more effective in the long-term, although direct and promotional marketing professionals have long advocated that their disciplines can build brands as well as increase sales. And, it seems, clients agree.

A granular breakdown of this main media category revealed that growth in marketing budgets was limited to other online advertising channels, with the net balance rising from 0.7% to +2.2%, while video marketing spend was stable (net balance up from -1.0%). All remaining categories recorded quarterly downward revisions, with the out-of-home sub-segment leading the decline with the net balance recording -8.9% (up from -18.9 previously). Audio and published brands recorded net balances of -6.3% (-10.8% in Q1) and -4.8% (-8.3% in Q1), respectively.

Market research and the “other” category, meanwhile, were the only two tracked areas that experienced reductions to their advertising budgets, with net balances at -7.0% and -8.7%, respectively. That said, the degree to which expenditure was lowered was weaker than that observed in Q1, when the net balances recorded -10.5% and -11.7%, respectively.

Even so, Bellwether panellists were notably less pessimistic when evaluating financial prospects at both the company and industry level, following a quarter of deep negativity at start of the year.

At the company level, underlying data revealed that 21.9% of panel members expressed increased optimism compared to three months ago, just shy of the 24.9% indicating pessimism. Although the resulting net balance remained in sub-zero territory for the fourth consecutive quarter, it improved significantly from Q1’s reading of -12.9% to -3.0%.

In contrast, survey respondents remained severely downbeat towards industry-wide financial prospects, continuing a trend of pessimism that has persisted since Q4 2021.

While the respective net balance edged up from the previous quarter’s recent low of -37.4% to -26.2% in Q2, the latest reading still highlighted considerable negativity at a broader level. Specifically, 36.9% of firms were less upbeat towards financial prospects than they were three months ago, overshadowing the mere 10.7% that were more positive.

The report points out that the UK economy has already faced several challenges in the first half of 2025, yet growth is still anticipated, indicating a level of resilience.

However, S&P Global Market Intelligence’s expectations remain subdued. GDP is projected to grow by 0.8% this year, slightly higher than the 0.6% forecasted in the previous quarter. This adjustment was influenced by stronger-than-expected growth in the opening quarter of the year, although rising job losses and a general sense of economic uncertainty keep our forecast in subdued territory.

Consequently, surveyed respondents have indicated a loss in appetite for advertising. Forecasts for adspend in 2025 have been revised down from 1.3% to 0.7%, but 2026 is expected to see a recovery with adspend growth to more-than-double to 1.6%.

Inflation is expected to remain above the central bank’s 2% target throughout the year, which poses additional risks to growth. Moreover, uncertainties related to recent tariff changes from the US and ongoing geopolitical tensions in the Middle East are likely to dampen business and household sentiment.

Conditions are not predicted to become more supportive in 2026, with annual GDP growth anticipated to also come in at 0.8%, slightly below the 1.0% forecast in the previous Bellwether report. The GDP growth forecasts for 2027 and 2028 are higher, coming in at 1.4%, a fraction above the previous projections. Additionally, marketing budgets for these two years are also anticipated to increase, with expectations rising slightly from 2.0% to 2.1%.

IPA director general Paul Bainsfair said:”Looking at the broader picture, we welcome the news that UK companies have revised their marketing spend upwards in Q2. Advertising is a fundamental part of the creative industries, one of the eight sectors prioritised by the Government’s Industrial Strategy as key to the UK’s growth. This uptick in marketing investment not only contributes to the overall health of the UK economy but, for businesses with the foresight to invest strategically, it can also lead to significant growth and competitive advantage.”

Even so, Bainsfair continues to bang the drum for brand advertising, insisting that direct marketing and sales promotion are simply “tactical approaches”.

He explained: “While agility is crucial in today’s fast-paced market, it’s essential that short-term activation efforts are balanced with sustained investment in long-term, emotionally-driven brand-building strategies. By striking this balance, companies can position themselves not only for immediate success but also for enduring growth in an increasingly competitive landscape.”

S&P Global Market Intelligence economist Maryam Baluch, who is author of the Bellwether Report, added: “2025 Q2 was more upbeat, with spending rising markedly, reversing the previous quarter’s decline – the first in four years. This rebound reflects businesses’ renewed commitment to growing their brands, even amid ongoing economic challenges.

“Notably, budgets for sales promotions and direct marketing saw the biggest gains, indicating that companies are balancing short-term revenue and cashflow gains – likely necessitated by the intensification of global headwinds – with strategic and targeted marketing initiatives to help drive longer-term success. Less pronounced growth in events and PR budgets highlight a comprehensive yet measured approach.

“Furthermore, reduced pessimism regarding financial prospects at both the company and industry levels suggests that businesses are becoming more acclimatised to current market conditions.”