Interviews, insight & analysis on digital media & marketing

UK marketing budget growth at its strongest in over four years

UK marketing budgets have increased at their strongest rate since the second quarter of 2017, as the end of pandemic-related restrictions gave marketers the green light to more confidently spend, according to the latest IPA Bellwether Report.

25.6% of Bellwether respondents recorded higher spending in Q3 2021, versus 12.8% that reduced their budgets – a net balance of +12.8%, and more than double the +6% observed in Q2 2021. The result also means that there were successive quarters of growth for the first time in three years.

Main media advertising came out on top as the best-performing marketing category, with a net balance of +8.6%. Within that, video reached +12.6%, other online +10.6%, and audio +6%. Published brands returned to growth, jumping to +5.2% in Q3 from -6.1% in Q2, but out-of-home continued to struggle, falling -2%.

Direct marketing was the next best performer after main media, improving to a net balance of +5.6%, while sales promotions budgets were on the way up for the first time since the end of 2018, reaching a net balance of +4%. Market research showed signs of recovery to achieve marginal growth at a net balance of +0.7%, but event budgets suffered again (-3.2%), as businesses continued to be cautious about in-person activity. Elsewhere, both PR and other paid-for marketing budgets fell (-1.8%).

“Advertisers are making the most of the overall economic uptick and are seizing the opportunity to invest in their brands. It is particularly good to see that companies are investing more in main media ‘big ticket’ campaigns, with these budgets revised up to the greatest extent since Q2 2017. As the evidence shows, investing in long-term brand-building media is paramount to a brand’s long-term success,” said Paul Bainsfair, IPA Director General.

When looking ahead, respondents displayed the strongest level of optimism in their own-company finances since Q1 2015. A net balance of +37.5% of firms were more optimistic about the financial prospects of their companies, with around 48% of businesses expecting stronger growth than they did three months ago. Companies also had a more positive outlook about the wider industry, as +22.6% are feeling positive about what’s to come.

The vaccine rollout and the impact of the furlough scheme have meant that the UK’s overall economic recovery has been stronger than predicted by the Bellwether Report a year ago. IHS Markit, author of the report, is now predicting GDP to growth by 6.6% this year and 5.1% in 2022. This will help drive ad spend upwards by 6.6% and 6.2% across the years respectively.

“The UK economy’s performance over the third quarter has been remarkably positive, helped by the progressive loosening of containment measures and a successful vaccination programme. We couldn’t have imagined such a fast recovery in economic activity earlier in the year when lockdown measures were at their most stringent,” said Joe Hayes, Senior Economist at IHS Markit.

“We’re expecting UK GDP to have recouped all pandemic-related losses by no later than mid-2022, and Bellwether panellists have provided us with even more evidence that firms are working hard to re-grow their businesses, with one-in-four upwardly revising their total marketing budgets. As we said last time, we hope this is just the beginning, and businesses continue with their aggressive growth plans to keep momentum moving as the post-lockdown growth boom peters out.”

Here’s what industry executives had to say about the latest report.