Marketing budgets fall in UK

14 July 2011

LONDON: Marketing budgets in the UK remain in decline, not least due to concerns linked to the economy, a study has found.

The IPA, the advertising agency trade body, and BDO, the accountancy network, regularly survey 300 of the country's top 1,000 companies.

In all, around 22% of featured firms reined in their outlay during the second quarter of this year, measured against 20% boosting spending levels, resulting in a net balance of -2.2%.

This constituted an improvement on the -5.1% logged in Q1, but still represented the third successive negative quarter.

One of the primary reasons encouraging such a strategy from April to June was a desire to sure up profit margins given on-going financial uncertainty, the study asserted.

By medium, the balance between the amount of organisations directing more resources to main media, including the web, and those cutting back reached -4.2%.

Figures stood at -7.4% regarding sales promotion, suggesting this recession-led tactic is losing its appeal.

While the internet maintained a cycle of growth that has lasted over two years, its 1.9% improvement in Q2 - incorporating a 4.6% lift for paid search - was the smallest gain recorded in this timeframe.

Elsewhere, direct marketing expenditure also saw a net balance of 2.5%, although the "all other" category posted a less favourable -7.1%.

"At the start of the year, 2011 budgets had originally been set higher (compared to 2010 actual spend on average) to the greatest extent in three years," the study said.

"Given the recent downward quarterly revisions to spend, the 2011 forecast will grow increasingly unlikely if companies continue to trim their budgets in the second half of the year."

When assessing the broader outlook for the firm they represented, 31% of participants had become more upbeat, and 28% displayed lower levels of confidence than previously.

The number of optimistic executives has now outnumbered pessimistic respondents during each of the last nine quarters, although the size of the gap fell from 12.8% to just 3.3%.

Another 33% of contributors agreed the prospects for their industry as a whole had softened against Q1, and 22% provided a more positive appraisal.

The overall total of -10.9% managed to better the -12.3% yielded by the last round of Bellwether analysis, it dipped below the post-recession average, the IPA reported.

Nicola Mendelsohn, president of the IPA, said: "The economy is going sideways and this seems to be the way it is going in the advertising marketplace too."

"The decline in confidence doesn't augur well, but is not surprising amidst a continuing climate of concern surrounding the financial and political outlook both at home and internationally."

"But we should take some comfort from the fact that the rate of budget trimming is at its lowest in three quarters, and that there are advertisers maintaining spend nevertheless."

Data sourced from IPA; additional content by Warc staff