IPA Bellwether finds budget cuts easing and optimism growing

There are signs of recovery as cuts to UK marketing budgets are softest since Q1 2020, though pressures of lockdown restrictions remain.

As the UK’s vaccine rollout meets relaxed restrictions on the population, IHS Markit, which authored the IPA’s Q1 2021 Bellwether Report, expects a +3.7% expansion of GDP in 2021, followed by an even quicker rise of +5.8% in 2022.

On the back of this expansion, it forecasts a 3.5% increase in adspend for 2021 and 6.9% in 2022 to move toward the longer-term trend.

Key ideas

• A net balance of -11.5% of 300 panellists reported a contraction in total marketing budgets during the first quarter of 2021. While severe, this is substantially better than the -24% decline of Q4 2020.
• Looking at 21/22, a net balance of 17.4% of companies expect to see an increase in budgets for the next year, up from 12% in Q4 2020: the strongest growth expectations in the IPA Bellwether since 2018.
• How these increases are likely to be spent point to a return to the brand building trend that was accelerating pre-pandemic, as +10.1% of marketers anticipate increases in main media advertising, +7.4% in PR, and +6.8 in direct. Meanwhile, expectations around sales promotions were neutral.
• Further cuts in the coming year are expected: -28.4% of marketers expect to spend on events, while a -4.9% balance of marketers will spend less on market research.

Renewed optimism

• The IPA’s Bellwether panellists showed optimism for the first time since the beginning of 2015, with the balance of companies feeling more confident than Q4 +26.2%, up from -5.8%.
• Own-company prospects strengthened markedly, with a net balance of +36.6%, the strongest optimism for six years.

A picture of the future out of decline

Out of the continued drops in marketing spend, a picture emerges of how marketers and their companies are looking ahead by exploring where declines are slowing.

• Event spend: -43.2%, up from -62.9% in Q4 2020
• Market Research -17.8%, up from -25.0%
• Sales Promotions -16.2%, up from -26.5%
• Direct Marketing -11.8%, from -13.9%
• Main Media -8.2%, from -21.8%
• Public Relations (PR) -8.0%, from -8.5%

Key quotes

“Upbeat forecasts from UK marketers for the coming financial year, after the marked reduction in budgets through 2020, bolsters expectations for a post-pandemic recovery and bodes well for the UK economy. Without a doubt, the improvement in budget plans from the previous survey period will have been supported by the release of the UK governments roadmap to relaxing restrictions.” - Eliot Kerr, Economist at IHS Markit and author of the Bellwether Report.

“With companies’ confidence levels regarding their financial prospects soaring and with almost three quarters of UK companies either revising their marketing budgets upwards or keeping them the same this quarter versus last, the trajectory is very much moving in a positive direction and at a good pace.” – Paul Bainsfair, IPA Director General.

Sourced from the IPA