UK Adspend Ended 2005 in Downbeat Mode, Reports IPA

17 January 2006

The Bellwether Report, a quarterly survey of the health of the British advertising industry published by the Institute of Practitioners in Advertising, records that 2005 ended on a distinctly downbeat note.

Highlights from Bellwether, produced on behalf of the IPA by NTC Research, are ...

  • Marketing budgets are set to rise compared to 2005 but at the weakest rate since 2001 indicating that GDP growth is set to be downcast in early 2006.

  • Q4 marketing budgets were cut for the third consecutive quarter and at the sharpest rate for two-and-a-half years due to weaker than expected sales and poor profitability after an optimistic start to the year.

  • Budgets were most commonly revised down in the industrial, retail, consumer goods, and media sectors. Only in business services and the public sector were increases recorded.

  • Budgets cuts were seen in main media, sales promotion and 'all other marketing' (PR, sponsorship, market research and corporate communications). Main media saw the steepest fall in the six years of the survey.

  • Budget rises were seen in direct marketing and internet related activities. DM saw a modest rise while internet related marketing continued to record strong growth and now accounts for 4% of spend.

  • The total breakdown of marketing spend by activity at the end of the year was: media advertising 34%, direct marketing 26%, all other 26% (includes PR, sponsorship, market research and corporate comms), and sales promotion 14%.

  • In new budget setting, two thirds of the panel increased their budgets for marketing. Higher budgets were generally in support of new product or brand launches
Comments report author Chris Williamson: "Bellwether confirms that business conditions remained tough towards the end of last year. Slower than expected sales growth over the course of the year led to a trimming of marketing spend compared to that originally budgeted for the year.

He continues: "Companies are clearly entering 2006 in a more cautious mood than in recent years. Early signs are that marketing spend will rise during the year, but growth is likely to remain subdued and we are set to see a further shift away from main media advertising towards direct marketing and the internet."

The report underscores earlier downbeat forecasts from WPP Group ceo Sir Martin Sorrell. Says he: "Bellwether again confirms what we are seeing in the UK - a tough market, even in comparison to western continental Europe. New media activities, however, continue to show stronger growth."

Forth further information on Bellwether, click here.

Data sourced from Institute of Practitioners in Advertising; additional content by WARC staff