UK companies revise marketing budgets up despite tough economic conditions

After a strong start to the year, 23.8% of respondents reported an increase to their marketing spend, in comparison with 16.9% who recorded cuts. The resulting net balance of +6.9%, slightly below Q1’s +7.3%, pointed to a historically strong expansion in budgets. Meanwhile, approximately 59.4% of respondents left their marketing budgets unchanged in Q2.

Growth or decline by category in Q2 2026

As in the opening quarter, events was the leading category for greater marketing investment with a net balance of +11.0% registering growth, albeit down from +14.7% in Q1. This was followed by direct marketing that registered a modestly positive net balance of +3.0%, down slightly from +3.6% at the start of the year.

Main media advertising and PR also recorded modest growth in budgets at +1.5% and +1.4%. However, net balances retreated notably in the latest quarter, down from +4.5% and +6.0%, respectively.

A breakdown of the main media segment showed that Video was the only one of the five tracked sub-areas to record growth in Q2, with its net balance rising from +5.7% to a seven-quarter high of +8.2%. Meanwhile, budgets for Audio stabilised (net balance of 0.0%) after 12 consecutive quarters of decline. The remaining three sub-segments all saw reductions in spending. Published brands recorded the sharpest contraction, with the net balance broadly unchanged at -8.3%, from -8.5% in Q1. Other online was the second-biggest drag on overall main media spending, as respondents cut budgets for the first time in seven quarters. The net balance fell to -5.1%, marking a reversal of the +5.7% reading seen in Q1. Out of home saw only a modest decline with the net balance having risen notably from -11.3% in Q1 to -2.5% in Q2.

Sales promotions also saw an uptick in budget availability during Q2. However, the net balance of +0.9%, down from +2.7% in Q1, pointed to only a mild increase.

Conversely, marketing executives trimmed budgets for both market research and "other" activities, the latter covering all remaining paid-for marketing activity, during Q2. The net balance for market research improved to -4.1%, from -8.5% in Q1, indicating a moderated but still strong reduction. By contrast, the other category weakened further, with its net balance falling to -10.8%, from -8.9% in Q1.

Financial prospects take turn for the worse

Sentiment among Bellwether panellists regarding company-own and industry-wide financial prospects took a turn for the worse during the latest survey period.

After showing a recovery in the previous survey period, the net balance of respondents predicting better financial prospects at their own business slipped to -9.6% in Q2, from +0.6%. The net balance has now posted below the neutral threshold of zero for a second time in the last three survey periods. Underlying data show that nearly a third of respondents (32.3%) felt less upbeat about their financial outlook than they did three months ago, more than offsetting the 22.8% of firms that were optimistic.

After rising to a five-quarter high in Q1 with a reading of -21.0%, the net balance of firms anticipating better financial prospects for their industry as a whole fell to -25.1% in Q2. This therefore indicated greater pessimism among Bellwether panellists at the market level. In particular, 36.5% of panellists expect a deterioration in industry-wide conditions, more than three times the share that anticipate improvement (11.4%).

Bellwether adspend projections remain positive despite higher inflation

S&P Global Market Intelligence’s forecasts for UK GDP growth in 2026 is broadly unchanged at 0.6%, from 0.5% previously. While the war in the Middle East and its knock-on effects were factored into the previous forecast, developments since have limited the capacity to be more optimistic. Higher energy prices and inflation more broadly is damaging to household real incomes, while uncertainty and tighter financial conditions will weigh on business investment. Growth should improve in 2027, although the forecast is less positive than it was in the Q1 Bellwether Report (0.8%, down from 1.4%). As pressures from energy prices retreat, disposable incomes should rise, supporting better consumer spending prospects.

For adspend, S&P Global projections remain positive, with growth in real terms expected in 2026 despite purchasing power being hit by higher inflation. Our forecast is for adspend to grow by 2.1% in 2026, before rising 2.3% and 2.4% in 2027 and 2028 respectively.

Commenting on the Q2 IPA Bellwether Report:

Says Paul Bainsfair, Director General, IPA:

“The overriding message from this quarter’s report is that UK companies continue to recognise the value of advertising. Encouragingly, we also see signs that businesses understand the importance of investing in long-term brand building; within the main media category, investment in video advertising has been revised up to its highest level in almost two years, while spending on other online activity – a shorter-term activation medium - has been cut for the first time in seven quarters.

“In light of such challenges, it is therefore more important than ever that companies play the long game and continue to invest in brand-building media that is proven to be better placed to drive sustainable business growth.”

Says Maryam Baluch, Economist at S&P Global Market Intelligence and author of the Bellwether Report:

“Bellwether panellists have demonstrated notable resilience against a backdrop of persistent economic uncertainty. By continuing to bolster marketing spend – particularly as high inflation threatens to weigh on consumer demand – respondents are indicating a commitment to investment and brand-building activities that underpin growth.

“The fact there hasn’t been a considerable scaling back of activity in response to the economic shock arising from the Middle East war suggests firms are taking a strategic, longer-term view rather than getting bogged down in short-termism."

Mark Howley, COO at Publicis Media and Chair of the IPA Media Futures Group:

“The Bellwether Report indicates a broadly positive environment. Hopefully, a strong England World Cup performance will provide a better-than-anticipated Q3 trading environment, so actual growth may even be higher than this forecast”

Bill Doris, VP Analytics Lead, EMEA, WPP Media & IPA Media Research Advisory Group Chair:

“The latest IPA Bellwether Report Q2 2026 shows market research is still navigating a bit of a dry spell, hitting its sixth consecutive quarter of budget cuts. About 15.7% of companies trimmed their spending, leaving a net balance of -4.1%. While that’s a solid decline, it's actually an improvement on Q1's -8.5% and significantly less severe than the -13.7% plunge executives originally feared for the 2026/27 financial year. Is AI posing a direct risk to traditional, human-led research business models?”

Amy Lawrence, Head of Digital, EMEA, Publicis Imagine & Chair of the IPA Digital Marketing Group:

“Despite a more challenging economic backdrop, it is encouraging to see marketers continuing to invest in channels that support long-term growth. While overall main media budget growth softened slightly in Q2, video advertising stood out with its strongest performance in seven quarters, suggesting sustained confidence in brand-building media."

Jim Kelly, Deputy MD Head of Planning, Story and IPA Chair for Scotland:

“It feels apt as the latest Bellwether Report is published, to talk about a game of two halves. On one hand, it’s highly encouraging at a headline level to see just how resilient the sector appears to be despite the never-ending turbulence both domestically and internationally. With nearly a quarter of respondents reporting an increase in spending, the report describes it as being a ‘historically strong expansion in budgets’. On the other hand, with the healthiest increases being reported in Events and Direct marketing, this indicates a perhaps understandable focus on lower funnel conversion. Meanwhile, many main media budgets are reported as contracting and my underlying worry remains that long term brand investment is taking a back seat to the short-term commercial outcomes. The final result? It’s probably a score draw right now.”

Sue Benson, Managing Director, The Behaviours Agency and IPA Chair for England & Wales:

“Reading this quarter's report brings a mix of relief and reality. While another quarter of budget growth is fantastic news, the sharp drop in industry-wide optimism tells us that everyone is still feeling the pinch. My peers across England and Wales are experiencing this, daily budgets are available, but the nervousness is real. In these choppy economic waters, short-term activation is tempting, but brand memorability remains your best defence. Brands only grow when they are totally unignorable. Let’s use these resilient budgets to build deep consumer connections that stand the test of time. Onward.”

Samantha Smith, CEO, krow kinetic and IPA City Head for Bristol, South West & Wales:

“Despite another challenging quarter for the economy, it’s encouraging to see UK businesses continuing to back marketing, with budgets rising for a second consecutive quarter and at one of the strongest rates in the past two years. Events remain the standout area of investment, highlighting the value brands are placing on meaningful, face-to-face connections."

Penny Took, CEO, Mediaplus Connect and IPA City Head for Birmingham and the Midlands:

“The fact that marketing budgets are holding their own and, in some areas, increasing, is a substantial win for the industry in a global climate where the underlying backdrop is one of uncertainty and instability in so many areas. The industry is not immune to this uncertainty, with employment prospects remaining fragile, but this also reflects the realty of new ways of working, and how and where we embrace AI. As in all periods of huge change there has been turbulence, but I am confident that our industry will become stronger, more creative and deliver even better results because of it.” 

Nichola Elgie, Senior Account Director, Drummond Central and IPA City Head for Newcastle and the North East:

“While the headline is that marketing budgets are holding up, I’m not sure how much of a positive story it’s telling. Spend on events is up for the second quarter and very much leading the show, and the only main media increase is for online video. Are we simply building brands that become recommended by AI models - as we know, LLPs scrape data from online sources such as Reddit, TikTok and other social channels. I do worry that adapting marketing budget with a focus on how a brand is found by AI feels very short-termism and I’m keen to see what Q3 has in store and whether this will start to reverse.”

Gemma Longfellow, Chief People Officer, Open Partners and IPA City Head for Manchester and the North West:

"What jumps out from the latest data is a clear mandate for agencies to provide tangible reassurance and effective solutions to clients who are navigating industry pessimism and business instability, yet still have budgets available to take impactful action. Crucially, we must also apply AI thoughtfully in this quest, recognising the highly mixed views clients hold around the role it should play in their businesses."