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Less confident marketers up budgets

News, 12 October 2016

LONDON: UK marketing budgets were revised upwards in the third quarter, even as marketers expressed a growing degree of pessimism over industry's financial prospects, according to the latest IPA Bellwether Report.

The Report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +13.4% of companies registering an increase to their budgets during Q3 2016 –the highest rate in over two years as companies continued to invest in marketing despite Brexit uncertainty, and up from +10.7% in Q2.

Events enjoyed the strongest sub-category growth, with a net balance of +9.9%, followed by internet (+9.5%) and direct marketing (+4.9%). Main media advertising, however saw a negative net balance (-3.8%), as did PR (-1.1%), market research (-2.3%) and sales promotions (-4.0%).

Despite the optimism around budgets, the current economic and political climate is taking its toll as industry financial prospects remain negative, with the net balance here falling to -12.1%, the third successive reading below zero and the lowest recorded by the survey since Q4 2012. (A reading below zero indicates that a greater proportion of panellists have become more pessimistic than optimistic over the past three months).

Panellists were, however, more optimistic about their own company financial prospects during Q3, recording a net balance of +10.6%.

Reflecting these conflicting trends, the report anticipated limited growth in advertising expenditure during 2016: the previous downbeat assessment of the effects of the vote to leave the EU led it to predict a decline of 0.2% this year but it is now looking at a +1.9% uplift as the economy performs more strongly than had been expected.

But that is unlikely to carry through into 2017, when the formal process of exiting the EU is set to start with the triggering of Article 50 of the European Communities Act.

Adspend is expected to decline by 0.7% next year as business investment is pared back amid uncertainty over the terms of the UK withdrawal from the EU. This is expected to also weigh on consumption, with higher prices from the depreciation of sterling set to reduce household purchasing power and also undermine spending.

Data sourced from IPA; additional content by Warc staff