Don't panic, says IPA chief, Brexit cuts aren't fatal

IPA director general Paul Bainsfair has joined his industry peers in calling on advertisers not to slash their budgets post-Brexit, as the latest Bellwether Report shows that, while the long-term vision is not exactly rosy, it is far removed from the dire warnings of the doom-mongers.
The Q2 2016 Bellwether signalled a slight dip in direct marketing budgets during the second quarter of 2016, although it was marginal.
The respective net balance came in at -0.5%, compared to -4.9% in the previous quarter. That was the highest reading recorded in the past year, with a little over 13% of the survey panel registering a rise in DM budgets over the past three months, compared to nearly 14% that signalled a decline.
Final data for 2015/16 showed growth in DM for the third year in a row and looking at the 2016/17 financial year as a whole, panellists forecast that growth would be recorded, albeit at a relatively marginal pace.
Overall, marketing budgets were revised markedly higher in Q2 2016, extending the current record growth period to 15 consecutive quarters.
The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +10.7% of companies registering an increase to their budgets during Q2 2016, up from +3.0% in Q1 and the highest reading for a year.
Despite this growth, the survey – for which the vast majority of respondents had submitted their results before the announcement of the Brexit vote – hinted at some uncertainty among marketers. A record 68% of marketers signalled a freezing of their budgets over the quarter. This led to a shifting of their marketing spend around different sectors, while operating within previously agreed budget ceilings.
Equally, this uncertainty was seen in terms of confidence regarding marketers’ financial prospects. Q2 showed an increasing degree of pessimism regarding wider industry prospects. Sentiment regarding industry financial prospects dropped to the lowest level in 13 quarters, from -6.5% in Q1 to -8.1% in Q2, while confidence regarding their own financial prospects at +13.7% remained little changed on Q1 2016’s 13-quarter low of +13.6%.
In line with the deterioration in confidence and the wider uncertainty regarding the vote to leave the EU, Bellwether has downgraded its adspend forecasts to -0.2% for 2016 and -1.3% for 2017. This is first time since 2013 that the Bellwether has predicted a fall in adspend. Before Q2, Bellwether had previously predicted +3.3% and +2.7% growth for 2016 and 2017 respectively.
Events, Internet and main media advertising were the primary beneficiaries of the upwards revisions to marketing budgets. Events marketing revealed a series record net balance of +13.4%, a sharp rise on Q1’s +6.3%. Internet recorded a net balance of +10.9% up from +9.8% in the previous survey, continuing the period of expansion to seven consecutive years. Meanwhile, main media saw a marked uplift in Q2 to +9.3%, significantly higher than the +1.7% recorded in Q1, and a two-year high. (Within internet, search/SEO also showed a significant rise from +2.8% in Q1 to +7.6% in Q2, marking the best reading since the first quarter of 2015).
Bainsfair said “While the uncertainty in the economy caused by the vote to leave Europe continues to linger, we will experience an inevitable period of flux – as reflected in the Bellwether’s downgrading of adspend forecasts.
“Before companies react and cut marketing spend, however, it is worth remembering that all the evidence points to the opposite. Companies that keep investing during a downturn perform better financially than those that reduce marketing expenditure.
“We may be in uncertain times but we can be sure of the ways in which marketing can transform brands and boost company profits. It is therefore more imperative than ever that both agencies and clients continue to trust in the value of their ideas, skills and inventiveness.”

TOPICS:Bellwether Brexit EU referendum IPA