Marketing budgets have stagnated after 13 consecutive quarters of growth, with uncertainty surrounding the new Labour government’s upcoming budget leading to caution among advertisers.
According to the IPA’s latest Bellwether Report, 21.6% of UK companies opted to revise their budgets downwards – while exactly the same number of firms chose to revise their budgets upwards, leading to an improbable 0% net balance.
This is in stark contrast to the previous 13 quarters, which saw an average net growth of 8.8%, marking an alarming downward trend compared to Q2 (+15.9%) figures.
Despite this, several sectors performed promisingly across the third quarter, notably public relations, events and direct marketing, which all grew (by 11%, 9.9% and 9.7% respectively).
Main media advertising also continued to experience growth posting its second consecutive positive quarter, expanding from 3.5% to 4.3% – its strongest growth figures over the past year.
This was primarily driven by growth across big-ticket video campaigns, which grew by 11.7% (up from 7.8%), the highest since Q4 2022 – which in turn masked declines in other sectors such as out-of-home, which contracted by 15.7%.
“Negative hype surrounding the impending budget has no doubt created choppy waters for UK companies and their marketers to navigate,” said IPA director-general, Paul Bainsfair.
“Looking to the positives, this quarter’s results reveal that companies aren’t cutting their marketing budgets; they are pressing pause until they know more about the government’s economic plans.
He pointed out that the figures may prove to be a temporary dip in overall marketing spend rather than the start of a long-term downward trend.
“Building on this, it is worth noting that our adspend forecast has been revised up for 2024 and 2025 because the economic data has been so strong so far this year, and that main media growth strengthened to a one-year high while sales promotion budget growth slowed – both of which are signals of bullishness.”
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He continued: “It is also worth remembering, as the expression goes, a smooth sea never made a skilled sailor. It is in the tough times that we know that our highly skilled, experienced agencies and their trusting, brave clients can reap significant market share for brands by continuing to invest in advertising.
“By raising their advertising voice when others go quiet – particularly in longer-term brand-building media, brands can achieve greater market stand-out, and in doing so strengthen their value and embolden their price elasticity.”
More optimistically however, S&P Global Market Intelligence has upwardly revised its GDP forecast for 2024 quite considerably, rising to 1.2% from 0.6%. This would see adspend increase by 0.6% in real terms for 2024, versus a flat estimate previously (0.0%).
Growth across 2025 is expected to follow in a similar vein, with adspend touted to expand by 1.3%, bolstered by stable GDP growth figures of 1.3%. Adspend growth is expected to reach closer to 2% from 2027 onwards.
S&P Global Market Intelligence principal economist, Joe Hayes added: “After some bumper quarters for UK marketing spend, and a decade-high expansion in the last survey, the Q3 Bellwether report suggests that companies have dialled back their advertising activity levels.
He described the result as “disappointing”, while also predicting it is more of a temporary step back, rather than the start of a downward trend.
“One reason why this might be the case is the autumn budget, which is subject to much uncertainty about what new policies the government will announce,” he continued.
“Fears of unfavourable taxation changes were frequently cited by panellists. Indeed, throughout the Bellwether survey’s long history, there have been several general elections, and history tells us that political uncertainty often weighs on decision-makers.”
