Despite the general consensus that the UK economy entered into a technical recession at the end of 2022, the last quarter of the year experienced another quarter of total marketing budget growth, according to the latest IPA Bellwether Report.
Of those surveyed, 20.2% increased their total marketing spend in the fourth quarter, while 18% reported budget cuts, marking the seventh consecutive quarter of positive growth. The net balance of +2.2% almost mirrored that of Q3 2022 (+2.1%).
The top performing Bellwether category in Q4 was events, recording a net balance of +5.7%. Main media returned to growth (+4.4% versus -3.1%), with video (+13.7) and other online (+6.3%) driving growth within the category. Audio budgets remained unchanged, while published brands (-3.9%) and out-of-home (-11.2%) both experienced declines.
There was further negative recorded in the remaining Bellwether categories, including direct marketing (-0.6%), PR (-1.9%), sales promotions (-4%), market research (-8.8%), and other marketing activities (-10.1%).
“The latest Bellwether survey provided some interesting insights into how UK companies are planning to navigate an impending UK recession. Another quarterly expansion in total marketing budgets at a time when business costs have hit multi-decade highs and consumer confidence has plunged suggests many businesses understand the importance of investing in resources that will help them get through the downturn as best as possible,” said Joe Hayes, Senior Economist at S&P Global Market Intelligence and author of the Bellwether Report.
For the next financial year, there is a great feeling of optimism within the surveyed companies. 39.5% of them expect their total marketing budgets to be higher in 2023/24, with just 15.3% predicting spending cuts.
This optimism is evident across all of the seven broad Bellwether categories, with all set for budget growth.
Despite marketing growth, a combination of high inflation, increased interest rates, and low consumer confidence has meant that Bellwether panellists remain pessimistic about both the industry-wide financial outlook and their company-own outlook.
A significant 41.8% of respondents feel financial prospects have worsened within their specific industry, compared to just 8.7% who are optimistic. Similarly, 32.8% of respondents are more downbeat about their company-own outlook, compared to 15.6% who feel optimistic.
Bellwether authors S&P expect GDP to shrink in 2023 by 0.8%, and ad spend to fall by 0.3%. That being said, S&P predict a short and shallow recession, with moderate growth returning in 2024.
GDP growth is expected to reach 0.6% in 2024, 1.3% in 2025, and 1.5% in 2026, while ad spend grows by 1.2% in 2024, 1.8% in 2025, and 2% in 2026.
“Given the immediate outlook for the UK economy has deteriorated since the previous Bellwether Report, this quarter’s results are most welcome. While understandably cautious, they are nonetheless in positive territory,” said Paul Bainsfair, IPA Director General. “We can see that the companies that can are holding their nerve and continuing to invest in marketing through the downturn, with supporting anecdotal evidence from the report also revealing that a lot of companies who are concerned about losing market share to competitors have either maintained or increased their spend accordingly. This indicates that marketing is being used both defensively and offensively.
“It is particularly good to see positive revisions to main media budgets this quarter which is helping to drive the overall upward figure, fuelled particularly by investment in video advertising. As our evidence shows, this will stand brands in good stead during a downturn as brand-building advertising has a proven ability to maintain a brand’s pricing power and protect its profit margins.”