Recovery Slowly Gathers Pace For UK Advertisers
The long-awaited UK advertising recovery continued to gather pace in the first quarter of this year as the economic climate stabilised and business confidence gradually returned to marketing executives.
The IPA’s latest quarterly Bellwether report reveals that current budgets were revised up in the first three months of 2004 following higher than expected sales revenues and an improvement in profits. Marketing spend for the coming financial year was also increased, but the anticipated surge in media investment failed to materialise.
Just over a quarter of UK companies reported upwards revisions to their marketing budgets, with just 16% reducing spend allocated for the same period. The results are drawn from a panel of over 250 UK marketing professionals and act as a barometer of the relative health of the industry.
The study follows a season of cautious trading updates from the likes of Capital Radio, Emap and Daily Mail & General Trust. However, 2004 is still being earmarked as a year of recovery and the Advertising Association predicts adspend will rise by 3.2% following nearly three consecutive years of decline (see UK Advertising Expected To Grow by 3.2% in 2004).
Commenting on the findings, Sir Martin Sorrell, chief executive WPP Group, said: “This report demonstrates yet again the recovery in advertising and marketing services spending in the UK. This follows the trend we have seen elsewhere, but in a milder form. There are also indications that advertising and marketing services spending will stabilise or grow as a proportion of gross national product in 2004.”
IPA president and chief executive of WCRS, Stephen Woodford, added: “The latest Bellwether Report suggests that the economic recovery which has been indicated in recent reports is becoming more firmly established. The current picture reflects the most positive climate across all sectors since Q4 1999.”
According to the IPA, budgets for all main marketing activities were revised upwards in the first quarter of this year. The strongest rates of increase were recorded for internet advertising and direct marketing, as brands continued to seek more accountable and cost effective ways to market their products.
Current media advertising budgets were revised up during the same period, with FMCG and financial services showing the most significant increases. Although only modest, the change to media budgets was significant in that it was the first recorded by the survey since the first quarter of 2000.
The report also painted a positive picture for the coming months with further growth of marketing spend indicated for the coming financial year. Almost 50% of the companies surveyed said they plan to increase their budgets this year, compared to just 15% reporting a decline for the same period.
Increases in 2004 spend were indicated for all the main marketing activities, with direct marketing set to see the strongest gains. The weakest outlook was recorded for media spend, but one in three companies reported that adspend budgets for the 2004/2005 accounting year had been set higher than actual spend in the previous year.
The latest Bellwether report adds weight to a consensus of recent forecasts compiled by MediaTel INSIGHT, which suggests that UK advertising expenditure will increase by 3.9% in 2004 and by 4.9% in 2005.
IPA: 020 7235 702 www.ipa.co.uk
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