Ad budgets suffer as downturn continues

More than one-third of UK businesses have cut back on advertising and marketing spend over the past year to cope with a weakened economy, according to a report released this week by Continental Research.

Advertising spend was the worst hit; 38% of companies surveyed, an estimated 433,000 businesses across the UK, have reduced budgets in the area, while 28% have reduced outsourcing spend, 27% have cut R&D budgets and 25% are reducing travel.

Staff are also feeling the effects of the downturn; 21% of firms have reduced training budgets and 18% have cut back on their wages bill.

Retail and distribution companies have been most reticent to invest in their brands over the past 12 months. In that sector, 48% of companies have reduced advertising and marketing spend. This compares to 34% of service companies.

Smaller companies have been the fastest to retreat from the media as the outlook has worsened. Advertising and marketing spend has been reduced at 39% of smaller companies, compared to only 27% of larger ones.

However, the regional press, smaller companies' favoured advertising medium, remains the most popular place for companies to advertise their wares, according to the report.

Local newspapers and magazines are used by 49% of UK companies, led by 50% of the country's small businesses. The second most popular  medium in the UK is direct mail, which is used by 38% of businesses overall, but a significant 49% of larger businesses.

The popularity of e-mail continues to grow, with 32% of UK firms investing in the medium over the past year. Sales meetings and trade exhibitions remain the favoured channels to reach customers for large companies, which also dominate other pricier media such as the national press, television and posters.

"Large companies have concentrated their cutbacks on outsourcing, and salaries and wages, suggesing a reduction in headcount, or fewer bonuses being paid," said Continental Research director Colin Shaddick. "Small businesses, meanwhile, are more likely to be cutting spending on advertising/marketing and R&D."

This article was first published on Media Week