UK Ad Budget Growth in Q1 Highest for Three Years

17 April 2007

LONDON: Britain's Institute of Practitioners in Advertising - the body representing advertising, media and marketing communications agencies - yesterday released its latest quarterly Bellwether Report on UK marketing spend.

The latest Q1 data registers the strongest increase in marketing spend for three years, with one in every four companies reporting an upward revision to their total current marketing budgets. This represents a marked improvement on the budget-trimming seen through 2005-2006.

Inevitably, the strongest gains were in the online sector, which now accounts for marginally less than six per cent of all UK marketing spend.

Traditional media too enjoyed an upswing, notching the first positive revision to main media advertising budgets for two-and-a-half years and the largest gain since Q1 2000.

Moreover, Bellwether predicts further growth through 2007, basing this on initial budget-setting by marketers - at its highest level during Q1 since the same period in 2000.

The strongest growth in budget setting for the year ahead is for 'all other' marketing - ie event sponsorship, PR, SMS (short message services) and direct marketing.

Among the key pointers to the year ahead are ...

  • In Q1, 24% of companies reported increased total marketing budgets, while 16% reported a decrease, thus a net balance of 7.7%.

  • 54% of companies set their new budgets for 2007 higher than their actual spend in 2006, while only 17% have reported a reduction; this resulting increase (net balance of 37%) is the strongest since 2000 budgets were set.

  • Although main media advertising has seen the first upward revision for thirty months (with a net balance of 2.5%) this was still a modest revision as companies moved money away from traditional media such as press and TV.

  • Internet marketing budgets out-performed all other sectors in Q1, with a net balance of 19% of companies reporting an increase. Internet advertising now accounts for around £2bn of marketing spend per annum.

  • Direct marketing budgets were revised up only slightly in Q1. However DM saw the strongest growth of all categories in 2006 (excluding the internet).

  • By sector, increases to budgets were most widely reported in the service sector and consumer-orientated sectors, especially consumer durables, retail and FMCG. Budget cuts were most widely reported in industrial and utilities and media sectors.
Summarises the report's author, Chris Williamson of NTC Economics: "Surging corporate profits and above-trend economic growth has led to a further strengthening of marketing spend, with companies investing in additional marketing to support business expansion plans and new product launches.

"The planned increase in spend for the 2007 accounting year represents the most upbeat start to a year that we've seen since 2000."

And WPP Group ceo Sir Martin Sorrell notes: "The Bellwether Report, once again, reflects what WPP is seeing in the UK - a recovery against (admittedly) weak comparables, with the spending increase being dominated by expansion in direct, internet and interactive media.

"The UK mirrors what is happening in western continental Europe. Direct internet and interactive spending, however, still lags consumer use of such media, with consumers spending reportedly 20% of their time online."

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