UK marketing budgets decline

12 July 2012

LONDON: Marketing budgets declined in the UK during the second quarter of this year, and the outlook appears mixed for 2012 as a whole, according to a new study.

A regular survey of 300 major firms by the IPA, the ad industry body, and Markit, the research group, showed that nearly 23% of organisations reduced their outlay in the second quarter, and 22% enhanced it.

More specifically, the Bellwether Report revealed the net difference between the number of companies opting to boost expenditure and those taking the opposite route stood at -1.1%.

By category, this figure hit -1.7% for traditional media and -1.1% for direct marketing. Paid online search, by contrast, logged a 5.1% positive balance, standing at 5.1% for the entire web. Sales promotion also posted 4.5% here.

"The Q2 downward revision to total budgets suggests that it remains a close call as to whether actual spend will increase this year, which had been the plan at the outset of the year," the study said.

"Annual budgets have initially been set higher in each of the past two years, only for actual spend to decline by year end as confidence in the business outlook and surrounding the euro area debt crisis have failed to dissipate."

Elsewhere, just 18% of the panel were in an increasingly upbeat mood regarding the prospects for their industry, versus 26% the previous quarter.

Similarly, 35% of the sample had become more negative about the trading conditions facing their sector, an expansion from 25%, as the net balance fell from 1% to -16.8% quarter on quarter.

When discussing their own company, 30% of interviewees agreed the financial position was deteriorating compared with three months ago, and 32% had grown more optimistic.

As a result, the score of 19.1% posted on this metric in the Bellwether Report during the first quarter had dwindled substantially, to 2.1%, in the second.

Chris Williamson, Markit's chief economist, said: "The second quarter saw some fairly typical risk aversion creeping in to marketing plans as the
economic outlook dimmed and sales often disappointed.

"The downturn in confidence is not surprising given recent events in the euro area, which is the UK's main trading partner, and gloomy domestic economic news in recent weeks."

Data sourced from IPA; additional content by Warc staff