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UK marketing budget growth hits one-year high, reveals Q1 2023 IPA Bellwether Report

Companies’ total UK marketing budget growth is at its strongest since Q2 2022, despite an intensely challenging economic environment both domestically and globally, according to the Q1 2023 IPA Bellwether Report. 

The data reveals the net balance of firms registering upward revisions to their marketing budgets in Q1 2023 is +8.2%, considerably higher than the +2.2% recorded in Q4 2022. While 21.1% of firms saw an expansion, 12.9% of firms registered budget cuts and around two-thirds (66.0%) recorded no change in spending.                                                                                         

Main media marketing, which includes online advertising activity and budgets for big-ticket campaigns on TV, recorded its strongest expansion in spending since Q1 2022 (net balance of +5.8%, from +4.4%). The breakdown of this category showed continued marked expansions in other online (+10.5%, from +6.3%) and video (+7.9%, from +13.7%), and a renewed upturn in audio (+1.7%, from 0.0%). Published brands (-1.9%, from -3.9%) and out of home (-12.4%, from -8.8%) were, however, drags on main media in Q1. 

Sales promotions budgets returned to expansion in Q1 (net balance of +8.8%, from -4.0%), rising at the strongest pace in nearly two decades as companies dedicated more resources to supporting their customers through the cost-of-living crisis. Another round of budget growth was also seen for events (net balance of +6.3%, from +5.7%) as marketing executives look to re-engage with new and prospective clients face-to-face. Direct marketing spending also rose at the start of the year (net balance of +4.2%, from -0.6%).                                                                                          

The remaining categories all recorded budget cuts, led by other marketing activity not already accounted for (net balance of -5.8%, from -10.1%), although declines eased in each case. A net balance of -0.6% of firms cut their PR budgets (from -1.9%), while a modest reduction was seen in market research spending (net balance of -3.2%, from -8.8%). 

Finalised data showing Bellwether firms’ expectations towards their marketing budgets for the 2023/24 financial period were strongly positive, in line with the findings from the preliminary estimates collected at the end of last year. More than a third (36.6%) of respondents foresee greater total marketing spend in real terms in the year ahead, compared with 16.9% anticipating cuts. This yielded a strongly positive net balance of +19.8%.

Amid some recent signs of easing cost pressures, latest Bellwether data signalled a fresh sense of optimism among panellists regarding their own company financial prospects. This was indicated by a net balance of +7.0% of firms that were optimistic towards their business outlook (vs a net balance of -17.2% previously).

Bellwether authors, S&P Global’s forecast for the UK economy has been modestly upgraded, with GDP in 2023 expected to decline by -0.2%, instead of the -0.8% anticipated in the last Bellwether Report. However, households continue to face shrinking purchasing power due to high inflation and borrowing costs, which will weigh heavily on the economy. The Bellwether therefore forecasts a small decline of -0.9% (vs. -0.3% previously) in adspend this year, a marginal improvement in adspend next year of 0.5% (1.2% previously), before expected growth to 1.6%, 2.0% and 2.2% in 2025, 2026 and 2027 respectively.  

Commenting on the latest survey, Paul Bainsfair, IPA Director General, said: “This is a positive start to the financial year for marketing budgets, all things considered, The overall increase in confidence from UK companies regarding their financial prospects is being reflected in their marketing budget decision making.“

“As the cost-of-living crisis continues, it is understandable for companies to offer sales promotions to help their customers’ tightened purse strings. To ensure brand loyalty isn’t eroded and to protect the long-term health of their brands, however, such activity must be coupled with investment in longer-term brand-building media. We are pleased, therefore, to see that while investment in sales promotion activity has spiked this quarter, investment in main media advertising was revised up to its strongest level since this time last year.”

Joe Hayes, Senior Economist at S&P Global Market Intelligence and author of the Bellwether Report, commented: “The latest Bellwether survey once again highlights the resilience of UK businesses who have endured both a pandemic and a period of plunging consumer confidence and multi-decade high inflation. Total marketing budget growth broadened out during the opening quarter, showing that more companies are tapping into their marketing resources to help them successfully navigate through economic turbulence.”