Marketers have enjoyed the biggest quarter-on-quarter confidence boost for five years, the latest IPA Bellwether Report shows – leading IPA director general Paul Bainsfair to postulate that adland "can dare to ready ourselves for the roaring twenties after all".
A net balance of 18.1% of those surveyed for the Bellwether said they were more confident about the financial prospects of their company than three months ago (the figure is the difference between the percentages that said they were more and less confident).
The last time the figure was higher than that was at the end of 2015, before the Brexit referendum kicked off a period of instability in the UK. In six of the last seven quarters the net balance was negative – and in Q2 2020, hit an 11-year low of -55.1%.
The companion question, which asks people about the financial prospect of their industry, also indiciated growing positivity. While a net balance of -5.8% expected financial prospects to deteriorate over the coming year, this was the smallest figure recorded since 2017.
Meanwhile, UK advertising budgets declined again during the final quarter of 2020, but the research suggests budgets are likely to recover in the next financial year.
Two-fifths (40.4%) of companies responding to the Bellwether survey reported a decrease in available funds in the fourth quarter, while only one in six (16.4%) saw an increase in their marketing budgets.
That gives a net balance of -24.0%, a significant improvement on those recorded in both the second and third quarters (-50.7% and -41%, respectively).
However, the research foud that a net balance of +12.0% of firms expect their total marketing budgets to be upwardly revised in the next financial year.
The Bellwether research is carried out by IHS Markit and involves a panel of about 300 marketers, primarily from the UK’s top 1,000 companies.
A net balance of companies saw their budgets fall across a vast majority of marketing and advertising segments, with events remaining the worst-performing category of Q4 at -62.9% (which has barely changed from Q3's figure of -64.1%).
"Other online" was the only category within main media to record a positive net balance revision at 0.7% (up from -6.5% in Q3), meaning slightly more brands are increasing spend in this area than reducing it.
Out of home, meanwhile, had a net balance of -36.7% reducing budgets, although this is an improvement from -50% in the previous quarter.
“2020 will be remembered as a year in which many things changed,” Ali MacCallum, UK chief executive of Kinetic Worldwide, commented.
MacCallum said that although budgets appear still to be in decline, industry members can “now clearly see the path ahead”, with the out-of-home sector set to become a “smarter and more agile, data-driven channel in 2021”.
“We are more equipped than ever as an industry to adapt quickly to any ongoing uncertainty as we slowly begin the return to normal life,” MacCallum said.
“Out of home, and particularly digital out of home, will rebound strongly when we've navigated through this pandemic, and in the meantime, it's capable of providing a pivotal platform for tailored, mass-audience messaging."
Anne Stagg, UK CEO of Merkle, claimed that adland should be “cautiously optimistic for the year ahead”, provided that the coronavirus pandemic is correctly dealt with in the coming months.
“The industry has proved robust, despite budgets, as it's rapidly evolved to meet the developing needs of a much-changed world last year,” Stagg said.
She argued that marketers will need to focus on nurturing one-to-one relationships with their customers in order to “survive and thrive in post-Covid conditions”.
“Customer experience management is set to become a vital differentiator for brands, as they look to stand out in an online marketplace where everyone has a stall," she said.
The report forecasts that UK adspend will have fallen in total by 17.8% in 2020, while GDP and consumer spending will be down by -11.6% and -15.6%, respectively.
It expects a “robust adspending growth” in the next few years, in light of the development and approval of Covid-19 vaccines, with adspend growing 6.9% in 2021 and 6.2% the following year.
Kirsty Giordani, executive director of the International Advertising Association, believes that 2021 could be a time for “tentative planning for recovery”.
“The UK industry has always been innovative, and while it is still operating under difficult circumstances, there are some signs of predicted growth, with more expected to come over 2021 and in following years,” Giordani said.
“As an industry we need to continue providing support and practical solutions to all who are part of it; this includes an emphasis on retaining and developing the young talent here who will help grow future success.”
“It is no surprise that Q4 sees UK marketing budgets remain in negative territory,” Bainsfair said.
Though the impact of Brexit is uncertain, “significant promise of green shoots” such as optimism towards this year’s budget plans may suggest a change in the air, he added.
“As the vaccination roll-out continues, as the lockdowns begin to ease and as firms adapt to post-Brexit rules, perhaps we can dare to ready ourselves for the roaring twenties after all.
“Those brands that have withstood the storm, kept their voices heard and their subsequent market share up, will be the ones consumers turn to first in the good times.”
Eliot Kerr, economist at IHS Markit and author of the Bellwether Report, said that while an increase in total marketing budgets is on the horizon, growth will likely be limited to certain areas as the pandemic continues to disrupt life as we know it.
“Although advertising budgets continued to fall sharply at the end of 2020, it was promising that the rate of decline continued to soften following the unprecedented contraction during the second quarter,” Kerr said.
“Given the current Covid-19 restrictions in the UK, that could last for several more months, it is unlikely that categories such as events spending will start to grow.
“The recovery in those areas is more likely to begin in 2022, when we hope that the current economic climate is nothing more than a distant memory.”