UK marketing budgets continue to struggle in face of coronavirus
- Thursday, October 22nd, 2020
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UK marketing budgets continued to struggle in the third quarter of the year, amid the ongoing COVID-19 pandemic, following the biggest budget decline in the 20-year history of the IPA Bellwether Report in Q2 2020.
In the Q3 2020 edition of the report, 52.6 per cent of marketers recorded a decrease in their budgets, with only 11.6 per cent seeing an increase. This represents a net balance of -41 per cent, an improvement on the -50.7 per cent seen in Q2 2020 but also the second-quickest decline after that period.
“While Q2 marked the nadir for UK marketing budgets, we had hoped for a slightly sharper rebound to UK marketing budgets this quarter than we see here. With a second wave of COVID-19, coupled with ongoing Brexit negotiations, including bracing for no-deal, I think green shoots in the immediate term are increasingly unrealistic. We are at the mercy of these macro trends and we can’t know for sure right now whether it will be a V-shaped, U-shaped or perhaps a W-shaped recovery,” said Paul Bainsfair, IPA Director General.
“What we do know, however, is that the evidence proves that those who can invest in marketing during the downturn will reap rewards in both the short and longer term. They will increase their brand recognition, strengthen their brand positioning and get ahead of the competition. In fact, because many advertisers do not heed this advice, just maintaining spend at normal levels leads to a greater share of voice and in turn greater brand share.”
Events budgets continued to be the hardest hit advertising area, as ongoing social restrictions cause damage. 67.9 per cent of respondents recorded a decline in events, while just 3.8 per cent saw an increase in available spend.
On the other hand, direct marketing and main media advertising witnessed the joint-softest budget cuts. However, both areas still recorded a net balance of -25.3 per cent of firms recording downward revisions. Within main media, ‘other online’ campaigns were the least affected sub-category (-6.5 per cent) and out-of-home was the most affected (-50 per cent).
In the other four broader categories, the ‘other’ category suffered a deficit of -40.2 per cent, making it the area hit with the second-steepest decline. This was followed by sales promotions (-36 per cent), market research (-32.6 per cent), and public relations (-31.4 per cent).
When looking toward the future, industry sentiment remains negative, but is heading in the right direction.
48 per cent of marketers are pessimistic about the financial prospects of the industry, versus only 16.8 per cent who are optimistic. However, this net balance of -31.3 per cent is a massive improvement on the -66 per cent seen in Q2 2020.
34.6 per cent of panellists felt negatively about the financial prospects of their own company, compared to 30.7 per cent feeling optimistic, which is the least downbeat the industry has been so far this year.
IHS Markit, authors of the report, predicts that there will be an 11.2 per cent contraction in GDP during 2020 – a slight improvement on the 11.9 per cent decline forecasted in Q2 2020. Meanwhile, the ad spend forecast has got worse, slipping to -23.3 per cent from -11.3 per cent in Q2. Looking into 2021, the prediction is that GDP will expand 4.6 per cent and ad spend will rise 11.3 per cent.
“With UK businesses continuing to adjust to a ‘new normal’ amid the coronavirus pandemic, marketing budgets remained under severe pressure in the third quarter of 2020. The broad-based decline across all types of marketing budgets highlights the negative impact that the public health crisis is continuing to have on business conditions. Unsurprisingly, events remained the hardest-hit category, with social distancing measures limiting the viability of such spending, although reductions in every other monitored area were also substantial,” said Eliot Kerr, Economist at HIS Markit and author of the Bellwether Report
“Looking forward, if the UK can avoid another large-scale coronavirus outbreak and achieve a smooth exit from the European Union, we should see an improvement in economic conditions as firms learn how to better operate in this new business environment.”
You can read the industrys reaction to the report here.