IPA Bellwether: Budgets up as UK economic worries subside
The Q4 2013 IPA Bellwether Report, published today, reveals a strong upwards revision to marketing budgets, marking the fifth quarter of consecutive growth and the second-highest rate of growth in the survey’s history.
The latest report also indicates that companies are “loosening their purse strings” as worries about the wider UK economy subside.
Conducted on a quarterly basis since Q1 2000, the report revealed a net balance – calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision – of +11% of companies registering an increase in budgets during Q4 2013 – down slightly on the series record of +12.3% in Q3.
Companies also remained “highly confident” about their own financial prospects with the net balance of firms that have become more optimistic measuring +47.0% – only slightly lower than the series record high registered in Q3 at +49.2%.
Companies are also confident about industry financial prospects in the coming months with the net balance unmoved at a series-record high of +35.4% in Q4.
The optimism looks set to continue into 2014 with provisional data for 2014 financial year budget plans revealing that a net balance of +25.8% companies are expecting to see growth – the most positive reading since 2008.
Additionally, the Bellwether’s predictive model, which is based on the Office for Budget Responsibility’s prediction for economic growth of 2.4%, forecasts a resultant 3.3% increase in adspend in 2014.
In the longer-term, however, the predictive model anticipates a slowing in GDP and consumer spending growth in 2015 which will be offset by an upturn in investment, leaving adspend growth unchanged at 3.3%.
A stronger economic recovery going forwards will then deliver a more substantial increase in adspend to over 4.0% in 2016, 2017 and 2018.
By sector
Internet spending budgets again recorded the sharpest improvement with a net balance of +9.2% and, within internet advertising, search also recorded an increase (+3.8%), although this is the lowest recorded rate of growth for both since Q1 2013.
Sales promotion (+1.9%), events (+1.8%), and direct marketing (+1.2%) also saw growth.
Main media advertising saw no change to budgets since the previous quarter, but falls were recorded elsewhere including PR (-2.8%), market research (-2.5%) and other paid for marketing activity (-2.3%).
“The latest Bellwether Report findings once again will send an upbeat message to the advertising industry and the UK economy at large,” said Paul Bainsfair, director general of the IPA.
“With the current run of growth in marketing budgets now extending to five quarters, it seems companies are spending again to drive business growth. Confidence remains high as the economic situation continues to improve, this is encouraging to hear and welcome news.”
Chris Williamson, chief economist at Markit and author of the Bellwether Report said: “One of the most encouraging signals from the survey is the indication that companies are feeling more confident about investing in growing their businesses, advertising to build brands, supporting new product launches and taking the plunge in being more aggressive about boosting revenues.
“This increase in risk appetite should add to the sustainability of the economic recovery and represents a great start to the year.”