LONDON: UK marketing executives are currently "living in a period of flux", according to the author of the latest IPA Bellwether report which reported a modest upwards revision of budgets in the first quarter alongside declining confidence about the industry's financial prospects.

The report, which has been conducted on a quarterly basis since the start of 2000, revealed a net balance of +3.0% of companies registering an increase to their budgets during Q1 2016.

This was up from +0.5% in Q4 2015, although down on the levels seen throughout much of the preceding two-and-a-half years. (The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision).

But confidence regarding the industry's financial prospects deteriorated sharply to the lowest level since the start of 2013, from +7% in Q4 2015 to -6.5% in Q1 2016.

Optimism regarding companies' own financial prospects also fell, from +20.4% in Q4 2015 to +13.6% this quarter, marking the lowest level since late 2012.

In spite of a less optimistic financial outlook, marketing executives were still upbeat about their own budgets for the coming accounting year, with +23.3% forecasting higher spend in 2016/17.

As a result of these developments, Bellwether is now predicting adspend growth of 3.3% for 2016, a downward revision to the 3.9% in projected in Q4 2015.

Paul Smith, Senior Economist at Markit and author of the Bellwether Report, observed that the slump in sentiment was "probably not helped by uncertainty around EU membership – and that's led to those holding company purse strings to adopt ongoing prudence and caution when committing funds to areas such as marketing.

"While this inevitably has led to downward pressure on budgets, steady sales flows are encouraging new product development and enabling marketing executives to eke out some modest growth in funds."

Internet marketing once again saw the strongest upward revision to budgets of all Bellwether categories, recording a five-quarter high of +9.8% (from +6.9% in Q4 2015) and marking 27 quarters of continuous expansion.

Events also saw a marked increase to budgets of +6.3% and main media recorded modest growth of (+1.7%).

Reduced spending was, however, seen in sales promotion (-8.4%), direct marketing (-4.9%), 'other' marketing activities (-4%), PR (-4%), and market research (-3.1%).

Data sourced from IPA Bellwether; additional content by Warc staff