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Brexit Uncertainty Blamed for UK Marketing Spend Dip in IPA Bellwether


Q3 Bellwether report sees first drop in spend for seven years; Paul Bainsfair warns of a ‘false economy’

Brexit Uncertainty Blamed for UK Marketing Spend Dip in IPA Bellwether
A ‘wait-and-see approach’, triggered by economic and Brexit-related uncertainty have been blamed for a dip in marketing budgets uncovered by the Q3 IPA Bellwether report.

Firms surveyed have relayed a net decrease of 0.5%, though nearly two thirds of the Bellwether panel reported no change to their marketing budgets. Nonetheless the cuts shared by 18.2% of respondents have been significant enough to contribute to an overall drop.

Low consumer confidence has led marketers to postpone high investment big marketing drives - main media advertising budgets were placed on hold during the third quarter (+0.0%) following some relatively solid upward revisions in the first two quarters of the year (+5.2% and +5.6% respectively), signalling a reluctance among firms to commit to big-ticket marketing campaigns. Digital marketing has seen an overall increase of 6.1% - though that growth has slowed.
The areas worst affected are market research spending (down 16.9%), direct marketing (down 7%), promotions (down 2.3%) and PR budgets (down 4.7%).

Paul Bainsfair, IPA Director General warned that nervy businesses cutting marketing spend were setting themselves up for poorer long-term prospects. "It’s a false economy to cut one’s ad budget when things look uncertain. The evidence shows that far from being prudent, it can have a negative long-term effect on growth. Companies that hold their nerve consistently, and that invest in the 60:40 ratio of longer-term brand building to shorter-term sales activation, outperform the market."

Joe Hayes, Economist at IHS Markit and author of the Bellwether Report identified a difficult UK economy and low confidence as the key downward drivers, though he echoed Paul Bainsfair’s sentiments. "The latest Bellwether survey spells further disappointment for the UK marketing industry, which is suffering, just like the rest of the economy, as a result of spending delays, firms placing projects on hold and subdued business confidence. The UK economy has endured a tough year so far and firms have subsequently withdrawn discretionary spending to protect profit margins.

"Perhaps the most discouraging sign is to see firms sitting on the fence regarding main media advertising, which is a vital form of long-term brand building, following resilient budget growth in the two previous quarters. Overall, as long as political and economic uncertainties remain at large, it will be surprising to see noteworthy boosts to marketing spending."

Reacting to the report, Valerie Ludlow, CEO, ASG & Partners and IPA Chair for Northern Ireland, said that the findings reflected on-the-ground experiences of agencies and clients, who “ find ourselves treading water in these unprecedented times.” The uncertainty has, she says, been driven not simply by Brexit, but by a lack of clarity of what ‘Brexit’ really means, particularly in her local market of Northern Ireland.

Tom George, UK CEO, GroupM and Chair of the IPA Media Futures Group said the report was unsurprising but that GroupM was predicting a 6% growth in advertising expenditure for the year.

Looking towards the end of the year, the Bellwether Report predicts that it’s likely that, overall, 2019 will see a modest increase of marketing spend of 1.1% compared with spend in 2018. Despite the uncertainty and pessimism indicated by the panel, the report forecasts more positivity in coming years, forecasting growth of  1.8% in 2020, followed by stronger rates of increase in 2021 (2.0%), 2022 (2.2%) and 2023 (3.1%).

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LBB Editorial, Thu, 17 Oct 2019 11:10:03 GMT