Confidence Ebbing Among UK Marketers, Warns IPA

20 July 2005

The Q2 Bellwether Report, published by Britain's Institute of Practitioners in Advertising, reveals that marketing directors cut their budgets for the first time in nearly two years - prompted by fears of a slowdown in consumer spending.

According to the quarterly report, marketing directors on average revised their budgets downward in the April-June 2005 period, the first such move for six consecutive quarters.

The reversal is all the more significant as the marketers sampled had initially increased their budgets at the start of this year, buoyed by strong growth in 2004.

Comments Bellwether author, Chris Williamson: "The buoyant confidence seen at the start of the year has been eroded over the course of the first half of the year, with the second quarter survey signalling the first downward revision to current marketing budgets since the autumn 2003 survey."

The main casualties of marketers' new caution are TV and the press, sustaining their third successive expenditure cutback - and the largest fall in two years. Instead, marketing directors diverted budgets to less costly and more accountable media such as direct marketing and the internet.

Online media now account for four per cent of all UK marketing spend, and in Q2 enjoyed substantial growth - albeit at a slower rate than the two previous quarters. Spending on direct marketing, however, remained flat, ending seven continuous quarters of growth.

The results indicate that Britain's advertising economy is likely to remain weak into the third quarter and possibly until the end of the year.

Sir Martin Sorrell, WPP Group ceo, put a neutral spin on the negative data: "Although the cuts in media, sales promotion, PR and corporate spending are disappointing," he said, "the IPA Bellwether report again emphasises the shift in focus by clients to direct, interactive and internet marketing."

Starcom UK group chairman Jim Marshall attributes the cutbacks to the downturn in consumer expenditure. "This in turn has hit advertisers' profits and, more significantly, their longer-term confidence," he said.

"At the moment there is some concern for the remainder of the year because we believe that, unless there is a reduction in interest rates, consumer expenditure and advertiser confidence is unlikely to increase significantly."

For further information on the Bellwether Report click here.

Data sourced from; additional content by WARC staff