Direct marketing shines bright amid economic storms

Further proof – if it were needed – of direct marketing’s resilience in the face of economic uncertainty has once again emerged, with the discipline revealed as the standout performer in Q1 2025, with the majority of UK firms revising their total marketing budgets down, in the first overall decline in four years.

According to the latest IPA Bellwether Report, a net balance of -4.8% of firms cut their marketing budgets, a marked shift from the previous quarter which recorded growth with a net balance of +1.9%.

Just under a quarter of panel members reported a reduction in their marketing budgets (24.2%), compared to 19.4% indicating an increase. Anecdotal evidence suggested that declining sales and reduced revenue led to a reallocation of marketing spend.

The segment breakdown of tracked marketing categories highlighted that the most significant drag came from the “other” marketing category, which encompasses any paid-for marketing not specifically included in other Bellwether categories. The net balance fell to a 16-quarter low of -11.7%, down from -4.2%. Market research also dropped sharply, as signalled by the net balance coming in at -10.5%, down sharply from +3.1% in the prior quarter.

The other sector to experience cuts in marketing budgets was the main media category, which recorded a net balance of -6.7%, down from -4.3%. Further analysis of this segment revealed that the downward budget revisions were nearly widespread. Out-of-home (-18.9% vs. -12.8% previously), audio (-10.8%, vs. -17.8% previously), published brands (-8.3%, vs. -10.2% previously), and video (-1.0% vs. -10.7% previously) all recorded contractions. Conversely, the other online advertising category saw a slight increase in marketing budgets (+0.7%, vs +2.2% previously).

Despite the overall downturn, there were standout performers in the opening quarter, with direct marketing leading the way. This category experienced a solid budget expansion, with the net balance rising to +9.0% (up from +5.6%).

Budgets were also revised higher for events (net balance of +5.4%, from +12.3%) and PR (net balance of +3.4%, from +6.8%), although both categories recorded weaker expansions than in the previous quarter. Finally, sales promotions budgets were again revised upwards in the opening quarter of 2025, with a net balance of +8.0%, up from +4.1%, indicating the strongest increase in almost two years.

While marketing executives revised their budgets down at the start of 2025, finalised data from Bellwether firms indicated largely positive forecasts for the 2025/26 financial period. Just over 36% of respondents expect an increase in their total marketing budgets, roughly double the 17.8% who foresee a decrease. This results in a final net balance of +18.4%, signalling strong optimism among marketing executives regarding their advertising spending budgets for the coming year.

Underlying data revealed that marketing budgets for all monitored categories, with the exception of sales promotions (0.0%), are expected to increase. The highest level of optimism was recorded for events, which registered a net balance of +16.6%, followed by direct marketing at +12.9%. Projected budget growth for the other marketing tools was comparatively more modest. This includes PR (+3.3%), market research (+3.1%) and main media (+2.0%).

The opening quarter of 2025 heralded a significant decline in financial prospects, both at the company and industry-wide level. The latest data revealed that 31.0% of respondents felt less optimistic about their own company’s financial outlook in Q1 compared to the previous quarter, while 18.1% reported a positive outlook. As a result, the net balance fell to -12.9%, from -1.2% in Q4 2024, marking the lowest level since the closing quarter of 2022. Respondents recorded a pessimistic outlook for a third straight quarter.

A similar trend was observed at the industry level, where the net balance hit a ten-quarter low of -37.4%, down from -20.1% in the previous quarter, indicating a less confident start to the year. Among the survey participants, 45.0% were less optimistic about the financial outlook for their industry compared to three months ago, while only 7.6% expressed stronger growth forecasts.

The report author, S&P Global Market Intelligence, has cut its 2025 GDP growth forecast to 0.6% from 1%, reflecting the weak economic performance in late 2024 and seen so far this year, according to survey data.

The Government’s fiscal tightening announced in the Autumn 2024 Budget may hinder business investment due to the expected increase in company tax burdens. High interest rates continue to burden households, with a slow easing of monetary policy expected from the Bank of England. Additionally, higher tariffs on US imports are anticipated to impact the second quarter of 2025, denting the UK industrial sector given the US is the country’s largest single export market.

Growth prospects for 2026 through to 2028 have also been lowered since the previous quarter, indicating that the UK faces short- and medium-term risks. However, no changes have been made to adspend forecasts, with those for 2025 and 2026, at 1.3% and 1.8% respectively, already coming in below-trend given the weaker economic outlook since last year. Nevertheless, advertising expenditures are still predicted to grow, which is a positive outcome in the prevailing business environment.

IPA irdector general Paul Bainsfair said: “In the face of President Trump frequently overturning political and economic norms, it’s understandable that more UK businesses have adopted a cautious, ‘wait and see’ approach to marketing spend this quarter. Even before the introduction of US tariffs on 2 April (thankfully now paused), the anticipation alone – combined with rising costs from National Insurance Contribution increases and the minimum wage hikes – was already influencing budget decisions.

“We’re seeing a familiar pattern emerge in these challenging times: increased investment in short-term sales promotions and cuts to main media budgets. While these adjustments may offer immediate relief, they are not a sustainable path to long-term brand growth. That’s why it’s encouraging to see that, when looking ahead to annual marketing budget plans, many businesses are preparing to reinvest in main media, demonstrating a continued belief in the importance of brand building, even in uncertain times.

“It is also noteworthy that revisions to direct marketing budgets remain firmly in positive territory, reinforcing last quarter’s insight that AI is playing a growing role in enhancing both the personalisation and efficiency of this medium for UK companies.”

S&P Global Market Intelligence economist Maryam Baluch, who is author of the Bellwether Report, added: “In spite of considerable macroeconomic headwinds for businesses, the Bellwether survey does provide some evidence of resilience among UK marketers. While the opening quarter of 2025 saw overall marketing budgets revised downwards, surveyed executives remain optimistic about the future on balance.

“Over 36% anticipate an increase in their marketing spend for the 2025/26 period, reflecting businesses’ commitment to driving growth and sales through volatile trading conditions. Increased budgets for direct marketing, events and sales promotions indicates a proactive and agile approach to overcoming these challenges.”