UK Ad Budget Cuts Sink to Alltime Nadir

13 October 2008

LONDON: Annual marketing budgets in the United Kingdom were revised downward in Q3 to the greatest extent ever recorded in the Bellwether Survey's near-nine year history.

Conducted by Markit for UK agency body the Institute of Practitioners in Advertising, the cutbacks represent the fourth successive quarterly reduction in spend and point to a marked deterioration in business conditions since the summer. 

Marketers attributed the cutting of budgets to lower than anticipated sales and profits in recent weeks, in turn reflecting weaker consumer and corporate demand, as well as growing concerns about the economy.

Highlights from the latest Bellwether include …

  • Business confidence suffers record fall
    The latest downward revision to spend indicates the increasing impact of the credit squeeze on the real economy, with companies participating in the Bellwether survey reporting that financial prospects for their own companies, and the industries in which they operate, both deteriorating at the fastest rates yet recorded by the survey.
  • Main media advertising and ‘all other' spend hit hard
    Hardest hit were budgets for main media advertising and the Bellwether's ‘all other' category, which includes activities such as PR, events sponsorship and market research, both of which saw record downward revisions.
    Budgets for sales promotion and direct marketing fared slightly better, indicating a gain in share of total marketing spend, but were nevertheless still revised down. Even internet advertising budgets came under pressure, with expenditure for the year held steady in Q3, contrasting with the robust growth seen in previous quarters and pointing to the weakest growth for seven years.
  • Recession risk increases
    The slump in the Bellwether marketing budget and financial prospects data are consistent with the economy contracting in Q3 and raise the possibility of the UK falling into recession, defined as two consecutive quarters of contraction. The weakness also highlights new downside risks to recent forecasts for the advertising industry, despite such forecasts having already been revised down sharply since the summer.
Bellwether is based on a questionnaire survey of around 300 UK-based companies that provide regular quarterly information on trends in their marketing activities.

The survey panel has been carefully selected to ensure that the survey data provide an accurate indication of actual marketing trends in the whole economy.

Participating companies therefore include a broad variety of advertisers in terms of market sector and geographical location. The survey panel has been recruited from the nation's top 1000 companies.

For further information on the quarterly Bellwether Report, click here.

Data sourced from IPA Online (UK); additional content by WARC staff