NewsLine Column: The Road To Recovery?
Ian Finlayson, the IPA’s finance director, considers the implications of the latest quarterly Bellwether Report and asks what the future holds for UK advertisers…
According to figures from the latest IPA Bellwether Report, which tracks the marketing budgets of over 250 top UK advertisers, there are reasons for optimism, despite another quarter of budget cuts.
The influential report, a key indicator of the health of the economy, shows an improving business sentiment among the UK’s top advertisers with regard to economic outlook. This quarter, total current marketing budgets were revised down on average for the fifth consecutive quarter, however the reduction was significantly less than was seen in Q2 2003 with only 22% of companies reporting downward revisions compared to 29% who revised down in the previous quarter.
This is also the first time in the surveys’ history that we have not seen a marked readjustment of budgets in the third quarter. However this could be a result of severe budget cuts in Q2 due to the impact of the war in Iraq on business confidence.
Media adspend appears to be the hardest hit, although the downward revisions were the smallest recorded since Q2 2002 and are significantly lower than levels seen in Q2 2003. In Q3, only 20% of companies revised down their media budgets compared with 28% in Q2. Moreover, 2% of companies increased media budgets this quarter, up to 16%.
Direct Marketing budgets realised their largest ever rise since Q4 2002 and was exceeded only by internet marketing. Sales promotion budgets were also increased on average for the first time since Q2 2002.
Overall, economic signs are seemingly more positive. The US economy is promising strength with the largest US companies reporting the fastest rates of growth since 2000. The FTSE World index has soared to highs of almost 40% from its lowest points. Inflation looks to remain low for the time being as do interest rates and unemployment figures. Even Eurozone economies are appearing more buoyant.
However, some analysts are calling for cautious optimism describing this as a ‘profitless recovery’. Companies need to demonstrate to shareholders that profits are as a result of demand and not cost cutting measures in the face of recession.
At a time when the business world is looking for signs of optimism, it should be noted that Bellwether data has acted as a leading indicator of adspend growth over the past four years, anticipating the downturn in adspend in 2000 and tracking in advance the short-lived upturn of 2002.
While the recent easing in growth of adspend was predicted by the Bellwether survey, the latest Bellwether data indicates a renewed upturn in adspend growth in late-2003 or early 2004.
The Bellwether Report is published by NTC Research on behalf of the IPA and is available To order directly from NTC Research by telephoning 01491 411000 or emailing: [email protected]
Alternatively visit www.warc.com/bellwether
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