Marketing budgets continue to shrink

Marketing budgets in the last quarter of 2005 were cut for the third consecutive quarter, at the sharpest rate for two-and-a-half years, according to the IPA's Bellwether Report.

Direct and internet-related marketing did not feel the same pinch and direct budgets grew modestly, at 3.4 per cent. Online advertising continued to show record growth with a 20.9 per cent increase. This sector now accounts for 4 per cent of overall spend.

Total marketing spend is still set to rise in 2006 but the increase is expected to be the weakest since 2001.

The slowdown has been attributed to weaker than expected sales and poor profitability after an overly optimistic start to the year. In the first quarter of 2005, budgets were set at the highest level since the Bellwether Report started in 2000.

Chris Williamson, the author of the report, said: "Companies are clearly entering 2006 in a more cautious mood than in recent years.

"Early signs are that marketing spend will rise during the year, but growth is likely to remain subdued and we are set to see a further shift away from main-media advertising towards direct marketing and the internet."