Online stays positive in Bellwether gloom

LONDON - Marketing budgets have suffered their biggest cuts in the eight-year history of the IPA's Bellwether Report as 35% of companies revise budgets down and the online sector is revealed as the only bright spot.

Only 12% of companies reported an upward revision to marketing budgets in this quarter's report, while 35% reported a reduction, giving a balance of minus 23%.

There were negative readings for all sectors of marketing spend with the exception of the internet and internet search, both very slightly positive.

The worst readings were for the media and "all other" categories -- which includes PR, events and market research -- each down by about 26%.

Direct marketing registered a negative balance of 5% and sales promotion a negative balance of 6%.

Moray MacLennan, the president of the IPA and M&C Saatchi Europe chairman, said: "I doubt these gloomy results will come as a surprise to anyone. In light of current headlines the biggest surprise may well be that 12% of companies' budgets were revised upwards.

"The industry will be watching the next set of results with great interest hoping that, following four quarters of decline, the downward curve levels off, despite the impending recession."

The report presages recession for the country, based on the correlation between marketing spend and GDP.

Chris Williamson, chief economist at Markit and author of the report, said: "The slump in the Bellwether marketing budget and financial prospects data indicate a severe worsening of business confidence and the rising impact of the credit crunch on the real economy, as companies rein in spending in the face of poor sales and growing fears over the economy.

"These data are consistent with the economy contracting in Q3 and raise the possibility of the UK falling into recession."

The report follows a prediction by Credit Suisse First Boston that the TV ad market will drop between 8% and 10% in the fourth quarter, and that 2009 will be 5% down on 2008.