Marketing budgets given boost, but confidence remains low

Latest IPA Bellwether Report contains green shoots but picture is hardly rosy.

Parliament: Brexit uncertainty continues to dent marketer confidence
Parliament: Brexit uncertainty continues to dent marketer confidence

Brand leaders have upwardly revised marketing budgets in the first quarter of the year, after budgets flatlined in the fourth quarter of 2018, although marketer confidence for the future remains low, according to the latest IPA Bellwether Report.

In 2019's first quarter, a net balance of 8.7% marketers said their budgets had increased – a stark improvement on the net balance of 0% reported for the final quarter last year, when marketing budgets were hit by uncertainty around Brexit.

Clearly, though, the confusion surrounding Brexit is continuing to damage business outlooks. While the latest net balance is the highest since the third quarter of 2017, marketer confidence is far from bullish. On the contrary, it is falling. A net balance of -2.7% of marketers were optimistic about the financial prospects of their businesses in the first quarter, compared with -0.9% in the previous three months.

This pessmism became more pronounced when applied to the overall business sector in which they operate. The net balance of companies expressing a downbeat assessment on industry-wide financial prospects was slightly better than before, at -22.6% compared with -28.6% in the final quarterof 2018, but it still reflected one of the most negative industry-wide outlooks since the 2008 global financial crash.

On a positive note, the boost to first-quarter spending has been fuelled by increases in internet, mainstream media and event marketing budgets, with 21.6% of the IPA study's panel members observing spending growth, compared with 12.8% who registered budget cuts.

Internet advertising was the best-performing category, with the net balance jumping from 2.1% in the fourth quarter of 2018 to 17.2% in the first quarter of 2019. This was driven by reinvigorated search and SEO spending (14.2% compared with -3.9%) and mobile adspend (3.6% against -2.4%).

Mainstream media campaigns received a shot in the arm (5.2% compared with -6.2%), as did events marketing (3.4% against 2.6%).

Other disciplines continued to suffer. Market research, sales promotions and direct marketing budgets improved during the first quarter, although they remained in the negative, with net balances of -4.2% (from -4.7%), -3.7% (from 3.8%) and -3.5% (from -5.6%) respectively.

Looking ahead to the 2019/20 financial year, forecasts reinforce this sentiment. A net balance of 3.4% expects budgets to grow, the weakest forecast to be made before a new financial year since 2009. This time last year, the net balance was 18%. While 26% of report respondents foresee growth, the remainder (74%) envisage cuts or no change.

There was positivity for mainstream media campaigns and events budgets, which registered net balances of 4.8% and 2.5% respectively. However, forecasts elsewhere were negative, with net balance for other marketing at -13.1%, PR at -7%, sales promotions at -5.3%, market research at -4% and direct marketing at -1.8%.

Paul Bainsfair, the IPA's director-general, said: "This sharp increase following Q4 2018’s flatlining signals that UK marketing budgets have received a much-needed kiss of life in an economy gripped by Brexit uncertainty. The smart marketers realise that to grow their businesses, they must invest in them, particularly in mass reach, long-term media.

"While the forecast for the year ahead remains uncertain given the seemingly endless Brexit negotiations, those that want real competitive advantage should follow the proven rule that if you increase your share of voice above your share of market, you should expect to experience growth."