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“Immediate green shoots increasingly unrealistic,” says IPA chief despite marketing spend upturn

Advertising spend continued to be heavily affected by the impact of the coronavirus pandemic during the third quarter of the year, according to the latest IPA Bellwether Report, with over half of around 300 respondents (52.6%) revealing that their budgets had decreased from the previous three months.

Despite an increase in spend by comparison to the previous three months, IPA director general Paul Bainsfair was pessimistic about future progress, especially with a no-deal Brexit also looking possible.

The Q3 report found that 41% of advertisers saw their marketing budgets cut (a decrease from 50.7% during the previous quarter) with events and out-of-home, perhaps unsurprisingly considering travel restrictions in place, continuing to see the highest fall in spend, even if the reduction was less than during the previous quarter.

Of all companies reporting a revision in spend; both direct marketing and ‘main media’ advertising were -25.3%, PR was -31.4%, market research was -32.6%, sales promotion was -36% and events at -64.1%.

Following the previous report that focused on the dramatic downturn in advertising spend that the UK faced while in the midst of the first wave of the pandemic spread, the second wave was signalled during the end of the third quarter, leading to a continued reluctance by companies to return their advertising budgets to the levels of spend at they had planned at the beginning of the year.

This period included the longterm lockdown where everyone except keyworkers were ordered to stay at home in order to prevent the spread of the virus. Many businesses saw their incomes decimated, with companies fighting for survival or closing as a result.

Brands that entered administration during that period included high street retailers such as Carphone Warehouse, Laura Ashley and Oasis.

Almost half (48%) of companies were found to generally offer a pessimistic view around industry-wide financial prospects with only 16.8% offering  an optimistic view. Although negativity was found to have ‘softened’ by comparison to the last quarter, where 66% were found to offer a negative outlook.

Confidence for 2021

Despite that, there is confidence that there will be a marked increase in ad spend in 2021 although it was recognised that the threat of another lockdown would further harm the economy, which has been unaccounted for by this research.

Despite this, the forecast of a 23.3% fall in adspend for the year remains in place.

“While Q2 marked the nadir for UK marketing budgets, we had hoped for a slightly sharper rebound to UK marketing budgets this quarter than we see here,” concedes Paul Bainsfair, Director General of the IPA.

“Green shoots in the immediate term are increasingly unrealistic,” he continued. “We are at the mercy of these macro trends and we can’t know for sure right now whether it will be a V-shaped, U-shaped or perhaps a W-shaped recovery. What we do know, however, is that the evidence proves that those who can invest in marketing during the downturn will reap rewards in both the short and longer term.

They will increase their brand recognition, strengthen their brand positioning and get ahead of the competition. In fact, because many advertisers do not heed this advice, just maintaining spend at normal levels leads to a greater share of voice and in turn greater brand share.”

Eliot Kerr, an economist for IHS which produces the Bellwether Report highlighted the disappointment in the lack of a “slightly sharper” rebound in marketing spend during Q2.

Last week, the IPA also revealed that marketers were seeing the influence receding when it came to financial decisions as businesses focus on short-term revenue generation as a priority in the wake of the pandemic.