Slow economy and costs limiting clients' budgets

IPA's Bellwether Report shows adspend shift from traditional media into internet.

Adspends are growing more slowly than at any time during the past four years as companies grapple with slow economic growth and higher than expected costs.

The downbeat news comes in the IPA's latest Bellwether Report, which pinpoints a drift by clients away from mainstream advertising into cheaper, more accountable media such as the internet.

The Bellwether research shows only 23 per cent of marketing budgets were revised upwards during the first quarter of the year - the weakest rise since 2002. Meanwhile, traditional media budgets have been cut for the sixth successive quarter.

"Consumer spending is slowing and this traditionally affects our industry," David Pattison, the IPA president, said. "There is optimism our industry will grow this year, but it looks to be limited in the current market conditions."

WPP's chief executive, Sir Martin Sorrell, said the Bellwether findings were confirmation Britain remained one of the world's weakest advertising markets.

Even direct marketing, which usually prospers when trading conditions are tough, suffered a cut in budgets for the first time in three years.

Sales promotion budgets dropped for the fifth successive quarter.

The internet was the only medium to buck the trend during the first quarter.

Almost 26 per cent of internet marketing budgets were revised upwards, the highest rise since the beginning of 2004.

Chris Williamson, the author of the report, cited high energy costs in particular as the reason for client caution. "Clients show a continued preference for activities such as direct marketing and the internet, which they perceive to be lower cost and more accountable than main media advertising," he said.

However, Tom George, the managing director of Mediaedge:cia, warned against excessive pessimism. "House prices have stabilised and there are no signs of interest-rate rises on the horizon," he said. "Also, a World Cup in Europe and a real chance for England to do well should give spend in the traditional media channels a boost."