IPA Bellwether: optimism over sector-wide prospects for first time since 2015

Report finds budgets are beginning to stabilise.

B&Q: launched optimistic campaign in March
B&Q: launched optimistic campaign in March

Marketers have expressed overall optimism about the economy for the first time since 2015, in the latest IPA Bellwether Report.

Overall, 41.2% of those surveyed for the Bellwether said they were more confident about the financial prospects of their sector than three months ago, with only 15% less so, giving a net balance of 26.2%, compared with -5.8% three months ago.

It is the first time this figure has risen above zero since the end of 2015, and the highest it has been since the start of that year.

Likewise, a net balance of 36.6% of marketers were more confident than last quarter about their own company's prospects, compared with 12.0% in Q4 2020. This measure, which consistently shows higher levels of confidence than its sector-wide companion, is also at its highest level for six years.

Budget cuts slowing

Cuts in marketing budgets eased in the first quarter of 2021, the Bellwether shows, hinting that conditions are continuing to stabilise as lockdown measures ease across the UK.

A net balance of -11.5% reported a contraction in total marketing budgets during the first quarter of 2021 – an improvement on the net balance of -24.0% in the previous quarter. 

IPA Bellwether: cuts in marketing budgets eased in the first quarter of 2021
IPA Bellwether: cuts in marketing budgets eased in the first quarter of 2021

One in four (25.7%) surveyed businesses saw a decrease in available adspend during this period – most of which has been blamed on the ongoing coronavirus pandemic – while 14.2% recorded an increase. 

Other contributors to falling marketing budgets include softer demand conditions, ongoing closures and cost-cutting programmes.

“Despite remaining in negative territory overall, the vital signs from this quarter’s Bellwether Report are looking ‘V’ encouraging for a bounce back in UK marketing investment,” Paul Bainsfair, director general at the IPA, said.

“With companies’ confidence levels regarding their financial prospects soaring and with almost three-quarters of UK companies either revising their marketing budgets upwards or keeping them the same this quarter versus last, the trajectory is very much moving in a positive direction and at a good pace.”

All seven segments of marketing spend suffered a further decline in budgets in the quarter. Events was again hit hardest with a net balance of -43.2% – though this was notably better than the -62.9% in Q4 2020 and -64.1% in Q3.

IPA Bellwether: events remains the worst-performing category
IPA Bellwether: events remains the worst-performing category

PR remained the strongest discipline in terms of revisions to budgets (above), followed by main media advertising and direct marketing.

Among main media advertising, video adspend returned to growth in the first quarter with a net balance of 3.3% (compared with -3.5% in Q4), while "other online spending" recorded a net balance of 0.0% (down from 0.7% in Q4) – meaning equal numbers of businesses are increasing and decreasing spend.

Bainsfair continued: “As the nation comes out of lockdown, consumers will be actively seeking out new products, experiences and entertainment, for which it will be more important than ever for companies to build and rebuild their brand awareness.” 

Growth in annual budgets

A net balance of 17.4% surveyed businesses have budgeted for increased spend this financial year (compared with 12% in the previous quarter), signalling the strongest growth expectations for ad spending since 2018. 

Main media advertising is tipped to improve in the next financial year, with 10.1% of participating firms budgeting higher expenditure compared with other broad marketing categories. Budgets in events, however, are set to decline (-28.4%). 

Eliot Kerr, economist at IHS Markit and author of the report, said that it was “positive to see a further trend towards stabilisation”, while upbeat forecasts from UK marketers for the coming financial year “bolsters expectations for a post-pandemic recovery and bodes well for the UK economy. 

“Without a doubt, the improvement in budget plans from the previous survey period will have been supported by the release of the UK governments' roadmap to relaxing restrictions.

“It has allowed businesses to look beyond the current climate and begin to build towards a time when demand will recover. If all goes to plan, a strong economic recovery should see adspending rise sharply in the second half of the year."

Adrian Coleman, group chief executive and founding partner at VCCP, said: “With growth expectations at their strongest since 2018, continued government assistance and a positive vaccine roll-out scheme, cautious optimism points to us being on the home straight.

“As we continue to navigate this period of transition and uncertainty whilst redefining ourselves as a post-Brexit nation, we need to keep our foot on the accelerator and support our clients more than ever before, in more agile, creative and cost-effective ways.”

Bellwether research is carried out by IHS Markit and involves a panel of about 300 marketers, primarily from the UK’s top 1,000 companies.

The report forecasts that UK adspend will have fallen in total by -15.7% in 2020, while consumer spending and business investment are down by -11.0% and -8.7% respectively.   

Coleman continued: “As an industry we’re brilliant at renewal, reinvention and revolution, and we need to go forward questioning our models, looking with fresh eyes at our ecosystems and taking advantage of new opportunities. 

“Despite the continued, many challenges of Covid-19 and declining marketing budgets, it’s in our reach to come back harder, better, faster, stronger.”

A version of this article first appeared on PRWeek sister title Campaign

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