UK marketing budgets make unlikely return to growth

London red telephone boxUK marketers increased their marketing budgets markedly in the first quarter of 2019 – a significant contrast to the fourth quarter of 2018, when budgets stalled for the first time in six years. Despite this, the surprise boost is unlikely to continue for the remainder of the year with continued global economic uncertainty leading to more caution for the rest of the year’s outlook.

The quarterly IPA Bellwether reports a net balance of +8.7 per cent of marketers saying they increased their budgets in Q1 2019, the highest uptick since Q3 2017. Around 21.6 per cent of IPA panel members reported spending growth, compared to 12.8 per cent who cut budgets.

The internet saw its net balance jump from +2.1 per cent to +17.2 per cent. Within this, search/SEO spending received a big swing from -3.9 per cent to +14.2 per cent and targeted advertising on mobile moved from -2.4 per cent to +3.6 per cent.

There was also a renewed drive for big-ticket advertising campaigns in Q1 2019, with main media marketing reaching +5.2 per cent from -6.1 per cent. Events also grew from +2.6 per cent to +3.4 per cent.

On the other hand, market research, sales promotions, and direct marketing budgets were all revised lower for the quarter.

Marketing budgets have received “a much-needed kiss of life in an economy gripped by Brexit uncertainty,” according to Paul Bainsfair, IPA director general.

“The smart marketers realise that to grow their businesses, they must invest in them, particularly in mass reach, long-term media,” said Bainsfair. “While the forecast for the year ahead remains uncertain given the seemingly endless Brexit negotiations, those that want real competitive advantage should follow the proven rule that if you increase your share of voice above your share of market, you should expect to experience growth.”

Despite the positivity within Q1 2019, marketers are erring on the side of caution with their forecasts for the 2019/20 financial year. A net balance of just +3.4 per cent expect budgets to grow over the period, representing the lowest forecast since 2019. This time last year was +18 per cent.

Approximately 26 per cent of panellists are expecting growth and the remaining 74 per cent expecting cuts or no change.

Alongside their caution, the general confidence among marketers remains negative, following the first downbeat outlook since Q3 2012 in the previous Bellwether survey.

A net balance of -2.7 per cent of those surveyed indicated a pessimistic assessment toward company finances, compared to the -0.9 per cent recorded in Q4 2018.

Industry-wide financial prospects also remained pessimistic, though the downbeat assessment fell from -28.6 per cent in Q4 2018 to -22.6 per cent in Q1 2019.

With the Office for Budget Responsibility (OBR) downwardly revising its growth projections for 2019 last month, dropping its expectations 0.4 percentage points from 1.6 per cent, the IPA Bellwether is forecasting a 1.1 per cent annual expansion to ad spend this year (previously predicting 1.3 per cent).

“A return to growth in marketing budgets during the opening quarter of 2019 may come as a surprise given the uncertainty that shrouds the UK political and economic climate has only built further since the previous Bellwether Report,” said Joe Hayes, economist at HIS Markit and author of the Bellwether Report. “However, some companies began to show a determination to step up brand-building and protection in these challenging times, taking a pro-active, yet defensive approach in the face of business belt-tightening and weakening consumer confidence. That said, cautious undertones were still apparent in budget plans for the 2019/20 financial year, with panellists providing only modest growth expectations in available marketing spend. In fact, the outlook was the most subdued since 2009.”