UK marketing budget growth has hit its highest rate in a decade across Q2 of 2024 as the wider economic climate begins to improve significantly, according to the latest IPA Bellwether report.
After an incredibly challenging few years for the industry, budgets are now being revised upwards at their fastest rate since Q1 2014 – the clearest indicator yet that the troubles of the pandemic are receding.
The net balance of UK businesses that expanded their total marketing budgets rose from +9.4% in Q1 to +15.9% in Q2, marking the 13th consecutive quarter of growth in UK marketing spend. Only 14% of respondents reported making cuts – equating to half (29.9%) of those reporting expenditure growth.
In further promising news for the industry, upward revision was recorded across every main category in Q2, with events continuing to lead the way and budgets expanding with a net balance of +17.2%, from +23.1%.
Direct marketing is also continuing to flourish, registering its sixth consecutive quarter of growth (from +7% to +8.9%), whilst growth in sales promotions (+4.9% to +6.9%), market research ( +1.4% to +3.2%) and PR (+0.6% to +2.6%) rounded off an immensely optimistic quarter.
Most encouraging however, is the return to growth of main media budgets which includes spending on blockbuster TV and radio campaigns, growing from -0.7% to +3.5%. These figures were driven primarily by online and video as out-of-home and audio struggled.
This broader positive trend was reflected in how companies felt about their own prospects (29%), with only 15.4% expressing pessimism (compared to 19.5% previously) resulting in a positive net balance of 13.6%, indicating the greatest degree of confidence towards company-own financial prospects since Q3 2021.
This is, however, offset by the fact that over a fifth (20.1%) of respondents feel downbeat about overall industry financial prospects, with only 16% feeling optimistic. The net balance of -4.1% is the least negative in over two years.
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“In line with the brightening economy, decreasing levels of inflation and a new Government, this quarter’s Bellwether Report reveals real vim and vigour regarding UK companies’ marketing spend intentions. As we know, advertising is a lever for growth for companies and so it is great to see them capitalising on these developments,” IPA director-general, Paul Bainsfair said.
“While we welcome this positivity, it is worth noting that while inflation levels have come down, this hasn’t yet translated into prices, and as such strains on many household finances prevail. This is something we’ve seen in our recently launched 2024 IPA TouchPoints data where more than a third of consumers say they are struggling to cope on their current income. Companies would benefit from being cognisant of this in terms of their communications approach and messaging to their consumers. I suspect that those brands that can bestow their sense of value, trust and reward will fare well here.”
The upward trend in marketing budgets is reflected in the Bellwether’s wider economic forecast, which has been revised upwards from 0.2% annual growth to 0.6%.
Growth does however continue to be dampened by ongoing headwinds caused by the mild recession experienced at the end of last year which has led to elevated borrowing costs, dwindling government financial support and persistently high food and energy prices.
As a result, S&P Global Market Intelligence expects real terms adspend to flatline in 2024 – although this does mark an improvement in the Q1 forecast, which predicted a -0.5% contraction.
The outlook for 2025 is markedly more positive, with the UK economy and adspend expected to improve further – bolstered by falling interest rates and inflation. S&P Global Market Intelligence forecasts adspend growth of 1.2%, 1.7% and 1.9% for 2025, 2026 and 2027, respectively.
S&P Global Market Intelligence principal economist and Bellwether author, Joe Hayes added: “While a general election carries the potential to generate a lot of uncertainty and decision-making paralysis in its lead up, it seems that UK companies in the Bellwether survey largely shrugged it off as a factor to consider when assessing their marketing budgets in the second quarter as growth jumped to a ten-year high.
“A strong performance by the UK economy so far this year, in tandem with falling inflation and the expectation of an imminent interest rate reduction by the Bank of England, has helped lift confidence, providing more fertile grounds for companies who wish to invest into their brands and position themselves for long-term growth.”
