Marketing spend falls in UK

18 April 2011

LONDON: Marketing expenditure levels continued to decline in the UK during the last quarter, but the outlook should improve as 2011 progresses, a study has argued.

Advertising industry body the IPA and accountancy network BDO regularly survey 300 companies, all of which are drawn from the country's 1,000 biggest corporations.

The results showed budgets fell for the second successive quarter in the opening three months of 2011.

Just over 25% of firms reduced their outlay, while 20% boosted spending, leaving a net balance of –5.1%, compared with –5.4% lodged in the previous such research, released in January.

Potential factors behind this trend were financial uncertainty, partly as a consequence of public sector cuts, alongside a surge in the cost of commodities.

"The latest report reflects the unsettled nature of the economy at present and hence the figures reveal a hesitancy that is not surprising," Nicola Mendelsohn, IPA president and executive chairman, Karmarama, said.

"However, we must remind ourselves that this downgrade is still markedly less severe than that seen throughout 2008 and 2009 and that it is encouraging to see companies are still planning to increase their spend versus 2010 levels."

Internet expenditure climbed 9.3% in Q1 2011, incorporating a 4.3% uptick on the part of paid-for search.

Main media, including the web, rose 1.1%, but direct marketing dropped 1.8%, the first such slide for 18 months, sales promotion contracted by 6.8% and the "all other" segment tumbled 11.2%.

Provisional data also suggested actual spending slipped for the third year in a row in 2010, contradicting initial expectations.

Nearly 34% of the companies represented recorded a decrease in investment over the course of 2010, measured against 17% heightening comparative expenses.

Looking to the 2011 financial year, 39% of featured operators intend to devote more funds to marketing, and 22% anticipate the opposite.

Mainstream media are likely to perform "relatively well", the study said, although online is set to retain a leading role in fuelling any expansion.

Elsewhere, pessimism seems to be growing about the prospects across the industry in which their organisation competes, as ratings fell to the weakest point since early 2009.

By contrast, the mood of contributors brightened somewhat concerning the situation for their own firm, having hit a one-and-a-half year low in the last poll.

"The outlook for 2011 looks a lot more positive with more businesses planning to raise their marketing spend compared with 2010," said Andy Viner, BDO's head of media.

"A higher proportion are now seeking to use marketing to help their businesses emerge even stronger from the downturn ... [and] to seize market share when competitors may still be cutting back on spend."

Data sourced from IPA; additional content by Warc staff