Bellwether Report: Decline in marketing spend eases in Q3

The rate of decline in UK marketing spend eased sharply in quarter three, according to the IPA’s latest Bellwether survey.

The Q3 report revealed that marketing spend fell for the eighth consecutive quarter but with the smallest reduction in budgets in over a year.

IPA linked the change to a strong rebound in business confidence, with almost half of the companies surveyed seeing improved prospects in line with the economy returning to growth.

Rory Sutherland, IPA president and vice-chairman of Ogilvy Group UK, said: “Although marketing spend is still falling this latest Bellwether is an encouraging sign that budget cutting is slowing. Whilst companies are still understandably wary, the report reveals a strong rise in business confidence and the suggestion that GDP may well have risen in Q3.”

Online advertising was the only category to see an increase in spend during the quarter, with budgets rising for the first time since Q2 2008.  This is an improvement on the Q2 Bellwether report, which found that spend remained severe and affected all categories, including online.

In Q3, ‘all other’ marketing – including below-the-line such as PR, events and sponsorship – suffered the steepest cuts once again, followed by main media.  However, cuts in main media were at their smallest for six consecutive quarters.

In terms of individual sectors, retail and travel & entertainment enjoyed upward revisions to spend, while financial services, non-governmental services, IT & computing and industrial sectors were among the worst hit.

Jim Houghton, head of marketing services, BDO LLP, said: “It will come as a great relief to the industry that the economic pressures seem to be easing. Evidently this relief won’t be uniform, with online and sales focused marketing disciplines the strongest.

“After two years of dramatic decline, the industry also needs to reflect on what recovery will mean when it does finally arrive. The recession will no doubt have a long-term impact on marketing agencies but with intense competition and continued constrained budgets, companies will have to drive both brand and sales. Well targeted marketing spend will be key to achieving this objective.”

Carat recently forecast a 12% overall fall in UK adspend this year but predicts modest growth for 2010, although a full recovery is not expected until 2011.