The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +10.7% of companies registering an increase to their budgets during Q2 2016. This is up from +3.0% in Q1 and is the highest reading for a year. (The net balance is calculated by subtracting the percentage recording a downward revision from the percentage recording an upward revision.)
Despite this growth, the survey – for which the vast majority of respondents had submitted their results before the announcement of the Brexit vote – hinted at some uncertainty among marketers. A record 68% of marketers signalled a freezing of their budgets over the quarter. This lead to a shifting of their marketing spend around different sectors, while operating within previously agreed budget ceilings.
Equally, this uncertainty was seen in terms of confidence regarding marketers’ financial prospects. Q2 showed an increasing degree of pessimism regarding wider industry prospects. Sentiment regarding industry financial prospects dropped to the lowest level in 13 quarters, from -6.5% in Q1 to -8.1% in Q2, while confidence regarding their own financial prospects at +13.7% remained little changed on Q1 2016’s 13-quarter low of +13.6%.
In line with the deterioration in confidence and the wider uncertainty regarding the vote to leave the EU, Bellwether has downgraded its adspend forecasts to -0.2% for 2016 and -1.3% for 2017. This is first time since 2013 that the Bellwether has predicted a fall in adspend. Before Q2, Bellwether had previously predicted +3.3% and +2.7% growth for 2016 and 2017 respectively.
Events, internet and main media advertising were the primary beneficiaries of the upwards revisions to marketing budgets. Events marketing revealed a series record net balance of +13.4%, a sharp rise on Q1’s +6.3%. Internet recorded a net balance of +10.9% up from +9.8% in the previous survey, continuing the period of expansion to seven consecutive years. Meanwhile, main media saw a marked uplift in Q2 to +9.3%, significantly higher than the +1.7% recorded in Q1, and a two-year high. (Within internet, search/SEO also showed a significant rise from +2.8% in Q1 to +7.6% in Q2, marking the best reading since the first quarter of 2015).
Upward revisions were also noted for PR (+2.3%) and ‘other’ (+1.2%).
Reduced spending was, however, seen once again for market research (-4.3%), sales promotion (-4.3%) and direct marketing (-0.5%).
Paul Bainsfair, IPA Director General:
“While the uncertainty in the economy caused by the vote to leave Europe continues to linger, we will experience an inevitable period of flux - as reflected in the Bellwether’s downgrading of adspend forecasts.
“Before companies react and cut marketing spend, however, it is worth remembering that all the evidence points to the opposite. Companies that keep investing during a downturn perform better financially than those that reduce marketing expenditure.
“We may be in uncertain times but we can be sure of the ways in which marketing can transform brands and boost company profits. It is therefore more imperative than ever that both agencies and clients continue to trust in the value of their ideas, skills and inventiveness.”
Paul Smith, Senior Economist at Markit and author of the Bellwether Report:
“The latest data showed that marketing executives were continuing to enjoy success in raising their budgets in the run-up to the results of the EU referendum, with the implied rate of growth the best for a year.
“The devil was, however, in the detail as an increased proportion of panellists indicated a freeze in budgets over the past three months.
"This observation gives credence to the notion that Brexit uncertainty was already impacting on decision-making, with an increased number of companies taking a cautious approach to budget setting, pushing marketing departments to utilise existing resources but concurrently asking them to meet goals of raising brand awareness and sales in an increasingly competitive environment.
“With Brexit now more likely to happen – and the widespread belief that the UK will subsequently experience a period of sustained economic turbulence – marketing executives, their budgets and the wider industry inevitably seem set for a challenging period in the months ahead.”
Read full industry reaction here.
The Bellwether Report is researched and published by Markit Economics on behalf of the IPA. First published on the 17th July 2000, it features original data drawn from a panel of around 300 UK marketing professionals and provides a key indicator of the health of the economy. The 8-page 14th July 2016 edition is available to purchase from the IPA website for £99+VAT (IPA members) and £140+VAT (non-members) as an immediately downloadable PDF. To sign up for an annual subscription, or to request historical data, contact firstname.lastname@example.org.
Last updated 14/07/2016