LONDON: Marketing expenditure in the UK rose in the final quarter of last year, but the challenging financial climate and low consumer confidence mean the outlook remains unclear going forward.

The IPA, the trade body, and Markit, the research group, polled 300 of the UK's largest companies, and found 20% had boosted their marketing budgets in the closing quarter of 2011, while approximately 19% cut back.

Overall, the net balance of the number of firms enhancing expenditure minus those reducing it stood at 0.6%, comparing unfavourably with the total of 3.4% registered during the previous quarter.

When considering traditional media, the difference on this metric came in at –1.2%. More positively, the amount of organisations raising sales promotion and direct marketing spend was 0.6% higher than for those adopting the opposite approach.

Online posted the best figures on this measure at 13.4%, rising to 14.9% for paid search alone. Such a trend was apparently indicative of changing priorities among brand owners.

Chris Williamson, Markit's chief economist, said: "There are signs that companies have become increasingly reluctant to invest in traditional media campaigns, instead diverting money towards the internet and direct marketing."

"This reluctance reflects lower than expected sales and profits in recent months, as well as growing unease about the economic outlook."

Where budgets were revised upwards, this was often to protect market share or support new launches, whereas decisions to trim marketing spend usually resulted from a need to manage costs.

Initial data from two-thirds of the panel suggested budgets should rise in 2012 on an annual basis, but also showed the planned increase was likely to be "weaker" than in any year before 2009.

While discussing the broader financial outlook for the industry their company operated in, the net balance was -44.9 in the final quarter 2011, versus -23.3 in the third quarter.

Moreover, in appraising the prospects for their own firm, sentiment fell for the first time since the start of 2009, as the proportion of contributors in negative mood increased from 26% to 37% quarter on quarter.

Data sourced from IPA; additional content by Warc staff