Bellwether: Brexit takes its toll on marketing budgets
The ongoing chaos surrounding Brexit has led to the weakest growth in total marketing budgets since the fourth quarter of 2015, according to the latest IPA Bellwether report.
Total marketing budgets were revised higher during the third quarter of 2018, extending the current period of growth to six years, but to the weakest extent in almost three years.
“With ongoing Brexit uncertainty, it is perhaps no wonder that companies are having to be more cautious with their marketing spend and are inevitably increasingly downcast about their financial prospects,” said Paul Bainsfair, director general, IPA.
“Despite this, however, we must take some solace in the fact that investment in main media spend is fairly constant quarter-on-quarter. As the evidence shows, main media is the most effective route to building brands.”
Marketers have been given more discretion over spending plans on large scale marketing campaigns, such as those relating to TV, radio or cinema – with the net balance of firms observing budget increases for main media advertising broadly unchanged from the preceding quarter at +4.9% (+4.8% in Q2).
Meanwhile, the report reveals another strong quarterly expansion in internet-based marketing during Q3, as signalled by a +13.6% net balance of firms observing upward budget revisions, largely led by search and SEO.
Elsewhere, other categories in the Bellwether survey to record budget growth included PR (+4.2%) and sales promotions (+0.6%).
On the other hand, marketing executives noted downward revisions to budgets for events marketing (-1.1%), market research (-3.7%), direct marketing (-7.4%) and ‘other’ marketing (-9.9%). [advert position=”left”]
With the Office for Budget Responsibility (OBR) yet to revise their forecasts for the UK economy since the Q2 Bellwether survey, the report’s UK adspend growth projections are unchanged.
The Bellwether estimates adspend to rise 1.1% on the year. A lack of clarity over the UK’s future relationship with the EU after Brexit, alongside rising cost pressures, will both act as drags on marketing expenditure.
Looking to 2019, adspend is expected to be met by slower growth and “muted” consumer spending. As such, Bellwether estimates adspend growth of 0.7% for next year.
“Since the end of 2016, there has been a distinct slowing of growth momentum in UK marketing budgets,” said Joe Hayes, economist at IHS Markit and author of the report.
“Latest Bellwether data revealed further sluggishness, as growing uncertainty towards the UK economy’s outlook as well as rising cost and competitive pressures impact companies’ discretionary spending. Over 60% of the survey panel observed no change in total marketing spend, highlighting indecisiveness and risk-aversion.”
Hayes added that the outlook over the coming three months signalled “further woes”, with panellists’ assessment of industry-wide financial prospects at the most pessimistic since the end of 2011.
“Nonetheless, marketing executives are still being allocated greater expenditure, particularly in the digital space,” he said.
“Strong competition is driving firms to explore new innovative methods to bolster market shares and retain existing clients.”