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UK adspend forecast hit by Brexit

News, 14 July 2016

LONDON: Despite a sharp uplift in UK marketing budgets in Q2 2016, the latest IPA Bellwether Report has downgraded its adspend forecasts for both 2016 and 2017 because of the uncertainty caused by the UK's vote to leave the European Union.

Bellwether now forecasts -0.2% growth for 2016 and -1.3% for 2017 and this is the first time since 2013 that it has predicted declining spend. Before the second quarter, Bellwether had forecast +3.3% growth for 2016 and +2.7% for 2017.

This reflects not just concerns about the consequences of the UK's historic decision, but also a growing level of pessimism among panel respondents about wider industry prospects that most reported on before the referendum vote itself.

A record 68% of marketers signalled a freeze to their budgets over the quarter while sentiment regarding industry financial prospects dropped to the lowest level in 13 quarters, from -6.5% in Q1 to -8.1% in Q2.

Meanwhile, confidence regarding their own financial prospects at +13.7% remained little changed on the 13-quarter low of +13.6% in Q1 2016.

However, on a more positive note, the report showed a net balance of +10.7% of companies reporting an increase to their budgets over Q2 2016 – up from +3.0% in Q1 and the highest reading for a year.

Marketing budgets rose significantly for events, which saw a record net balance of +13.4%, up from +6.3% in Q1, and for main media (+9.3% in Q2 from +1.7% in Q1).

Internet marketing budgets grew to register a net balance of +10.9%, up from +9.8%, while PR and 'other' also saw upward revisions of +2.3% and +1.2% respectively.

Paul Smith, Senior Economist at Markit and author of the Bellwether Report, said marketing executives were enjoying success in raising their budgets in the run-up to the EU referendum, but an increased proportion indicated a freeze over the past three months.

He said this implied that Brexit uncertainty was already impacting on decision-making and the setting of budgets and that the referendum result is very likely to make itself felt across the industry.

"With Brexit now more likely to happen – and the widespread belief that the UK will subsequently experience a period of sustained economic turbulence – marketing executives, their budgets and the wider industry inevitably seem set for a challenging period in the months ahead."

Data sourced from IPA; additional content from Warc staff