Interviews, insight & analysis on digital media & marketing

IPA Bellwether Report points to strong growth for UK marketing budgets

Total UK marketing budgets were revised up to their strongest level in almost a decade in Q4 2023, according to the latest IPA Bellwether Report, published today (18 January 2024). The latest results indicate that despite the intensely challenging backdrop for UK businesses, many companies opted to remain proactive in the market, instead of withdrawing into cost-saving mode.

Slightly over one quarter (26.0%) of panellists saw total marketing budgets rise in the fourth quarter of 2023, more than double the proportion registering cuts (11.3%). The resulting net balance of +14.7% was up sharply from +5.3% in the third quarter of last year and its highest since Q2 2014. This subsequently extended the current sequence of expansion in total marketing budgets to 11 quarters, the longest uninterrupted period of sustained growth since 2018.

Growth by category in Q4 2023

Events was the best-performing sub-category of marketing in the final quarter, recording a strongly positive net balance of +15.9%, its highest in a year-and-a-half (up from +5.9% in Q3). A notable finding was in direct marketing, which saw its greatest upturn (net balance of +12.6%, from +4.3%) since the opening quarter of 2005. These two categories were the principal drivers of total marketing budget growth at the end of 2023 as expansions of a more modest nature were seen in PR (net balance of +1.9%, down from +4.0), main media (+1.9%, down from +7.4%) and sales promotions (+1.4%, from -1.5%).

The slowdown in main media compared with a strong performance in the third quarter, where the category was the top performer. Underlying data revealed mixed trends, with other online advertising (net balance of +13.2%, up from +9.1%) and video (+6.6%, from 0.9%) contrasting with contractions in published brands (-1.4%, from +0.8%), audio (-7.0%, from -10.8%) and out of home (-8.1%, from -12.1%).

Just two of the seven Bellwether categories recorded a contraction in budgets in the final quarter – market research (net balance of -5.0%, from -1.5%) and other (-6.4%, from -7.9%).

Outlook for 2024/25 total marketing budgets remarkably strong according to preliminary budget setting data

Latest survey results showed budget expansions at 44.5% of respondents, around triple (15.1%) those that were restricting spending plans in the 2024/25 period. Consequently, a net balance of +29.4% of companies with stronger budgets than the last financial year showed a robust outlook for UK marketing.

Optimistic preliminary budget setting was seen in five of the seven Bellwether categories. Events is expected to have another strong year, with a net balance of +17.8% boosting their budgets for 2024/25, while direct marketing also appears to be an area of focus (net balance of +16.8%) after a strong fourth quarter revision. Encouragingly, main media is also set for a strong performance (net balance of +14.2%). The two remaining areas of expansion in 2024/25 are PR (net balance of +10.6%) and sales promotions (net balance of +8.2%).

As was the case for 2023/24, budget setting, the other marketing category was unchanged (0.0% net balance), while market research was the sole area expected to see budget cuts (net balance of -1.0%).

Commenting on the latest survey, Paul Bainsfair, IPA Director General, commented: “Despite the challenging economic climate, this quarter’s upbeat Bellwether findings show that companies are heeding the evidence that continuing to advertise through the tough times can help maintain brand loyalty and protect the long-term health of their brands.

“However, we also saw anecdotal feedback that some companies noted plans to price their goods and services more competitively in a bid to gain market share. While this is good news for the consumer, it is further proof that companies are experiencing a tough trading environment. On this point, with the evidence showing that investing in advertising helps protect sales when businesses raise prices, it may prove more profitable for companies to increase their advertising than reduce their pricing.”

Joe Hayes, Principal Economist at S&P Global Market Intelligence, said: “The resilience of UK marketing continues to be at odds with the worsening economic climate businesses are facing. Instead, companies are demonstrating the foresight to maintain a long-term view towards their brands, maintaining a healthy level of investment in the tools to stave off competition, retain clients and win new business. The UK economy is expected to endure a shallow recession, which will end in the first half of 2024, and our data clearly show more companies are prepared to ride out the bumps to put themselves in a strong position when the recovery phase kicks in than those that aren’t.”

Mark Howley, COO, Publicis Media and Chair of the IPA Media Futures Group believes that the latest Bellwether Report indicates a shift from caution to quiet optimism. He said: “Consumer confidence is on an upward trajectory, UK GDP figures show shallow growth (growth none-the-less), interest rates are dropping, VC investment rising and inflation is more-under-control. Indeed, underlying corporate growth and margins are extremely strong. So I think you will see brands invest for growth and invest for the future, which is the overall sentiment in the report. The main media investment increases predicted (+14.2% across 24/25) reflects this optimistic outlook. And I think it will be across all media; so audio, OOH and publishers perhaps faring better going forward than in the immediate past. And history shows us that the quadrennial occurrence of Olympics, Euros, US election normally creates a positive surge – quiet optimism is definitely the call.”