The latest IPA Bellwether survey reveals that 23.9% of marketing executives raised their budgets during the final quarter of 2017; however, ongoing economic uncertainty and growing client caution meant that 15.2% cut their total marketing spend.
The resulting net balance of +8.6% was down from +9.9% in the previous quarter and the lowest since the start of 2016. Although growth has weakened for a second successive quarter, marketing budgets have been continuously expanded since the end of 2012.
Internet marketing continued to see robust, but much slower, growth in Q4, with a number of respondents commenting on making greater usage of search/SEO and social media tools.
The net result was a further increase in overall internet marketing spend, extending its run of growth to eight-and-a-half years. However, Q4’s +10.9% was down on Q3’s +17% and the lowest recorded since Q3 2016.
Meanwhile, main media advertising returned to growth (+1.7%) after the previous quarter’s stagnation (0%). However, with internet a sub-component of the main media category, the latest data implies what the Bellwether describes as a ‘disappointing’ quarter for spending on the ‘big-ticket’ marketing areas of TV, press, cinema and radio.
Adspend predicted to grow 0.3% this year
With business investment and the wider economy as a whole showing some ‘unexpected resilience’ last year, the Bellwether has revised up its adspend growth forecast for 2017 from 0.6% to 1.4%.
However, with the Bellwether showing a loss of growth momentum in budget setting during the second half of 2017, this is expected to spillover into 2018.
With consumer spending set to remain under pressure from an ongoing real wage squeeze in 2018, adspend is set to rise by just 0.3%.
Adspend growth should pick up in 2019, but is expected to remain weak at just 0.7% before improving to 1% in 2020. In line with forecasts of improved economic growth, adspend is set to rise by 1.4% and 1.6% during 2021 and 2022, respectively.
Dr Paul Smith, director at IHS Markit and author of the Bellwether Report, said a relatively lacklustre fourth quarter ensured that 2017 proved to be a year of two halves.
“After a strong first half, marketing budget growth was notably slower in the final six months of 2017 culminating in Q4 with the weakest upward revision to budgets since the start of 2016,” Smith said.
“Whilst fears of a sharp deterioration in the UK economy following the surprising EU referendum result in 2016 have so far proven to be unfounded, the current trend in growth signalled by the Bellwether survey is nonetheless consistent with an economy undermined by ongoing Brexit uncertainty and an increasingly common “wait-and-see” attitude amongst businesses and consumers alike.
“Companies have subsequently adopted a similar attitude towards their marketing budgets. Whilst willing to expand in perceived cost-value areas such as digital they continue to do so by weighing down on budgets related to traditionally bigger-ticket main media campaigns.”
