IPA Bellwether: Economic worries take toll on marketing budgets
Marketing budgets increased for the third successive year but to the weakest degree since Q1 2013, according to the Q3 2015 IPA Bellwether Report, published today.
The reduction in Q3, which indicated a heightened caution amongst companies regarding the slowdown in some UK economic sectors and an easing in confidence surrounding the wider global outlook, was predicted by the Bellwether Report back in Q4 2014.
The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +4.4% of companies registering an increase in budgets during Q3 2015 – down significantly from the +12.2% reading in Q2 2015 and the lowest recorded since Q1 2013.
Alongside easing revisions to marketing budgets, optimism regarding marketers’ wider industry financial prospects continued to wane. A net balance of +6.8% of companies indicated they felt less optimistic about the financial prospects of the various industries they are operating within – down from +13.1% in Q2 2015 and marking a nine-year low.
Marketers’ confidence regarding their own financial prospects also eased, with a net balance of +22.4%, compared to +25.3% in Q2 2015, marking a two-and-a-half-year low.
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With the Bellwether survey highlighting a slowdown in marketing budget growth in the third quarter of the year, plus evidence of a wider macroeconomic slowdown, projections for UK adspend growth this year have been downgraded.
The latest forecast is for a real-term increase of +3.7% in 2015, a revision from +4.2% in the previous survey, with growth set to ease a little further in 2016 to +3.6%.
By sector
Growth was reduced in the majority of Bellwether categories in Q3 2015.
Internet was the best performing category at +7.8%, up from +6.8% in Q2 2015. Within Internet, spending related to search/SEO also continued to increase in Q3, up marginally to +0.6%, albeit significantly lower than the +6.5% reading in Q2 2015.
Events also registered marginal growth in revisions to marketing budgets at +2.8% and main media at +0.5%.
Declines in marketing budgets were seen elsewhere. PR (-5.8%) and market research (-4.7%) recorded the greatest falls, followed by sales promotion (-3.4%), direct marketing (-2.7%) and ‘other’ (-1.1%).
“As predicted by Bellwether, upward revisions to marketing budgets and confidence are easing,” said Paul Bainsfair, IPA Director General. “However the important point is they are still positive.
“More specifically, there are upwards revisions to internet, events and main media advertising budgets in Q3. We are seeing marketers demanding greater accountability, physical presence and share of mind in their planned marketing spend.”
Paul Smith, senior economist at Markit and author of the Bellwether Report, said that while the deterioration in the headline index to a 10-quarter low looks dramatic, the slowdown in growth was “somewhat on the cards”.
“As noted in the previous survey, confidence in the financial and economic outlook was already on the wane,” he said. “Since then, UK growth has softened, while concerns over the outlook in emerging markets and the wider global economy have increased.
“Moreover, casting the latest data against a record run of expansion in marketing budgets, a period that includes the strongest upward revisions on record, the correction in growth seemed likely.
“Focus is therefore probably better placed on the continued expansion in budgets and the welcome news that marketing executives are continuing to adapt a prudent, targeted approach to marketing strategies.”