The improving UK economic climate has seen companies revise their marketers spend upward for another quarter, stretching a run that dates back to the second quarter of 2021, according to the latest IPA Bellwether Report.
In the first quarter of 2024, 24.4% of the surveyed companies revised their marketing budgets upward, compared to 15% that saw a contraction. This may have been a net balance fall from +14.7% in Q4 2023 to +9.4% in Q1 2024, but it was the second highest in nearly two years.
Breaking down this growth into specific categories, events was the stand-out performer of the quarter, growing its net balance from +15.9 to +23.1%. Elsewhere, direct marketing (+7.0%, from +12.6%) cooled slightly but continued its growth sequence, while sales promotions (+4.9%, from +1.4%) gained momentum. Marginal expansions were also seen in (+1.4%, from -5.0%) and PR (+0.6%, from +1.9%).
Declines were only experienced within the main media (-0.7%, from +1.9%) and other marketing activity segments (-4.3%, from -6.4%). Looking at main media with more granularity, contraction was drive by out of home (-10.8%, from -8.1%), published brands (-5.7%, from -1.4%) and audio (-4.5%, from -7.0%), with other online (+7.1%, from +13.2%) and video (+0.8%, from +6.6%) unable to entirely offset the overall decline.
“Green shoots of recovery are appearing across the UK economy. With business survey data suggesting UK GDP will expand in the first quarter, it’s no surprise to see another strong round of marketing budget growth,” said Joe Hayes, Principal Economist at S&P Global Market Intelligence and author of the Bellwether Report.
“Cost-of-living pressures and high borrowing costs has led household and businesses to retrench in recent times, making the market more competitive to earn and retain customer business. Throughout this period, we’ve seen marketing perform strongly, so it’s very encouraging to see that firms are staying true to the course that has clearly yielded positive results.”
Looking ahead, respondents reported their budget plans for the 2024/25 financial year as being very positive, with 40.7% increasing the amount available for marketing, compared to just 18% making cuts.
Within this, events (+18.7%) are set to continue their positive run of growth, followed by direct marketing (+11.9%), main media advertising (+10.1%), PR (+6.3%) and sales promotions (+6.0%). The only contractions expected are with market research (-4.4%) and the other category (-3.4%).
Furthermore, overall pessimism toward industry-wide financial prospects, though still negative, have improved greatly (-5.4%, from -12.7%). And, regarding their own companies, respondents remain optimistic (+9.7%, from +12.6%).
Though UK GDP is forecasted to grow by 0.2% in 2024, ad spend is still expected to decline by 0.5% across the year. However, this is set to change in subsequent years with growth of 1.2% in 2025 and 1.9% in both 2026 and 2027.
“Spring is in the air, bringing with it a greater sense of optimism in the UK economy and in UK companies’ marketing spend intentions for the year ahead,” said Paul Bainsfair, IPA Director General. “Ahead of a suspected lightening-up on some economic pressures closer to home in the coming months, and despite wider geo-political uncertainties, UK companies are once again recognising the value of advertising by revising their spend up this quarter.
“One note of caution, however, is that we seeing companies revert to upping their promotional spend while revising their main media spend down – a trend that had been bucked over the past couple of quarters. While sales promotions can stimulate short-term sales increases, the evidence also shows that their over-use can undermine a brand’s profit margins and pricing power over time by habituating consumers to buy mainly on price. As always, a careful balance needs to be struck to ensure longer-term growth, for which greater investment in brand advertising particularly in main media, pays dividends.”
