Improving economic conditions have led to UK companies revising their marketing budgets upward at the highest rate in over a decade, according to the Q2 2024 IPA Bellwether Report. The rate also marks the second highest upward revision in the Report’s near 25-year history.
The net balance of UK businesses expanding their marketing budgets rose from +9.4% in Q1 2024 to +15.9% in Q2 – the highest level since the first quarter of 2014, when it reached +20.4%. In the second quarter of 2024, 14% of marketers reported budget cuts, compared to 29.9% who saw growth.
Breaking growth down by categories, events continued to be the best-performing marketing vertical, with a net balance of +17.2%, from +23.1%. Direct marketing also impressed, with budgets increasing for a sixth successive quarter and improving over Q1 (+8.9%, from +7%).
Meanwhile, main media budgets – which includes big-ticket ad campaigns broadcasted on TV and radio – returned to growth (+3.5%, from -0.7%). Breaking this down further, the expansion here was driven by other online (net balance of +15.3%, from +7.1%) and video (net balance of +7.8%, from +0.8%), because the other categories either stagnated (0% for out-of-home) or contracted (-5.5% for audio and -6.3% for published brands).
Elsewhere, sales promotions achieved the third-strongest expansion in budgets, with the net balance growing from +4.9% to +6.9%, representing a one-year high. And upward revisions were also recorded within market research (net balance of +3.2%, from +1.4%) and PR (net balance of +2.6%, from +0.6%).
The “other” category – which accounts for any other method of marketing not included – was the only one to register a contraction (net balance of -7.6%, from -4.3%).
“While a general election carries the potential to generate a lot of uncertainty and decision-making paralysis in its lead up, it seems that UK companies in the Bellwether survey largely shrugged it off as a factor to consider when assessing their marketing budgets in the second quarter as growth jumped to a ten-year high,” said Joe Hayes, Principal Economist at S&P Global Market Intelligence and author of the Bellwether Report.
“A strong performance by the UK economy so far this year, in tandem with falling inflation and the expectation of an imminent interest rate reduction by the Bank of England, has helped lift confidence, providing more fertile grounds for companies who wish to invest into their brands and position themselves for long-term growth.”
Looking at their company’s own financial prospects, the proportion of businesses that were more optimistic about what’s to come remained broadly unchanged at 29%, but those expressing pessimism fell to 15.4% (compared to 19.5% previously). That net balance of +13.6% is the highest level since Q3 2021.
Despite this, the negative feeling toward overall industry financial prospects continued, though the level of pessimism has fallen. The Bellwether respondents reported feeling downbeat in 20.1% of instances, while 16% are optimistic about the outlook of their industry. The net balance of -4.1% does, however, represent the least negative since Q1 2022.
With the UK economy having shown vast improvement, S&P Global Market Intelligence’s GDP growth forecast for 2024 has jumped to 0.6%, up from 0.2%. Nonetheless, caution is still expected, with ad spend (in real terms) predicted to “flatline” this year, though still an improvement on the previously predicted contraction of 0.5%.
Looking further ahead, ad spend is forecasted to grow by 1.2%, 1.7% and 1.9% for 2025, 2026 and 2027, respectively.
“In line with the brightening economy, decreasing levels of inflation and a new Government, this quarter’s Bellwether Report reveals real vim and vigour regarding UK companies’ marketing spend intentions. As we know, advertising is a lever for growth for companies and so it is great to see them capitalising on these developments,” said Paul Bainsfair, IPA Director General.
“While we welcome this positivity, it is worth noting that while inflation levels have come down, this hasn’t yet translated into prices, and as such strains on many household finances prevail. This is something we’ve seen in our recently launched 2024 IPA TouchPoints data where more than a third of consumers say they are struggling to cope on their current income. Companies would benefit from being cognisant of this in terms of their communications approach and messaging to their consumers. I suspect that those brands that can bestow their sense of value, trust and reward will fare well here.”
