GDPR and Brexit uncertainty hits marketing budgets

The long-awaited upturn on direct marketing budgets has yet to materialise, according to the latest IPA Bellwether Report, which shows that once again online marketing spend is shoring up the industry as uncertainty over Brexit and now GDPR is starting to bite.
Despite predicting that 2018 would be a bumper year for DM – a view which has been reinforced in the 2018 Q1 research – the sector saw budgets revised down -5.6%, the greatest downward revision in over five years.
An upward revision to DM budgets has not been observed since the equivalent period a year ago. However, marketing executives were more upbeat on DM budgets than any other of the Bellwether categories. A final net balance of +11.8% of panellists signalled positive forecasts for budgets for the 2018/19 financial year.
Meanwhile, Internet marketing spend was raised for a 35th successive quarter at the start of 2018, with a net balance of 8.7%, although even this was slower than the Q4 2017, which saw a net balance of +10.9%.
When asked about threats to the industry over the coming 12 months, Brexit continued to dominate responses. Whilst a number of panellists see opportunities from Brexit in terms of trade and exports, particularly in fast-growing emerging markets, others are less upbeat about the impact of the UK’s departure from the EU on their business.
Uncertainty over the actual outcome of the negotiations remained a dominant theme, with some panellists concerned that this is leading to belt-tightening among clients and undermining spending. Others are also worried about labour recruitment, especially after the UK leaves the EU.
With the implementation of GDPR in May, there is also the realisation that this could impact on business performance in the coming year.
On the one hand, a number of companies with strong data management capabilities and which are already compliant see the opportunity to push services to new clients. Conversely some panellists are worried that the new regulations will limit marketers conducting campaigns and have an adverse effect on the way they do business.
Commenting on the results, Dr Paul Smith, director at IHS Markit, said: “The ongoing slowdown in marketing budget growth comes as little surprise in the context of the challenging business environment and disconnect in recent surveys between budgets and subdued financial prospects.
“Rising costs and the ongoing uncertainty that exists over the future direction of the UK economy in a post Brexit world have led to caution and belt-tightening across a number of sectors, especially those more exposed to retail and consumption.
“Despite losing clear momentum since last summer, the positive news is growth is being sustained meaning the longest bull-run in the survey history continues. Whether this can carry on remains to be seen. Although the latest survey shows anticipated growth in 2018/19, the degree of optimism is the lowest in five years.”