UK ad market growth slows as brands exert ‘caution and belt-tightening’

UK ad spend growth to slow / Clem Onojeghuo

The UK ad market has grown for the 35th consecutive quarter although it will slow in 2018 from 1.8% growth in ad spend in 2017 to 0.8% for 2018.

The Institute Practitioners in Advertising's (IPA) Bellwether’s first quarter report polled 300 UK marketing professionals (selected from the UK’s top 1,000 companies) to give insight into the state of the economy and ad ecosystem.

More than a fifth (22.9%) of companies reported an increased marketing spend in the first quarter, compared with (17.9%) that reported a decrease. The net growth was the lowest recorded since 2016.

“Challenging market conditions and financial pressures squeezing budgets” was blamed for the stunted growth momentum.

Main media advertising slipped again, meaning TV, radio and cinema hit a negative, from 1.7% growth at the end of 2017, to a loss of 2.1%. Other contractions include market research, growing from -5.4% to -3.1%, sales promotions -5.3% from -3.0% and direct marketing -5.6%, from -4.5%.

PR and mobile spend stagnated.

Paul Bainsfair, director general of IPA, said: "Despite the slowdown, this quarter's results mark over five years of successive upward revisions to marketing budgets, signifying that regardless of external pressures - particularly Brexit uncertainties - most marketers still appreciate the value of advertising in building and maintaining their brands.

“Once again we are also seeing significant investment in internet budgets - for 35 quarters continuously – showing that in an 'always on' world, marketers are following the eyeballs. While we welcome this, it is worth remembering that the evidence shows that the most effective advertising achieves a 60:40 balance of brand building to sales activation media."

Dr Paul Smith, director at IHS Markit and author of the report, added that the slowdown comes as “little surprise” in light of “challenging business environment and disconnect in recent surveys between budgets and subdued financial prospects”.

“Rising costs and the ongoing uncertainty that exists over the future direction of the UK economy in a post Brexit world have led to caution and belt-tightening across a number of sectors, especially those more exposed to retail and consumption.

“Despite losing clear momentum since last summer, the positive news is growth is being sustained meaning the longest bull-run in the survey history continues. Whether this can carry on remains to be seen. Although the latest survey shows anticipated growth in 2018/19, the degree of optimism is the lowest in five years.”

Reacting to the news, Jo Lyall, managing director of Mindshare UK, said as a result of the slowing market, the focus on effectiveness becomes even more important.

"Digital budgets continue to see growth as advertisers can capitalise on the improved effectiveness that data and technology can bring," Lyall said.

"Mobile advertising might have stalled in its growth but the channel remains essential to many business models and consumer needs; we have recently conducted research to show that technology such as augmented reality will start to play a key part in consumers purchasing decisions as it evolves from the ‘evaluation’ or ‘post-purchase’ stages to facilitate direct purchase – so we believe that mobile will still be a strong contender for marketing dollars in the years to come.

Evangelos Sideras, joint managing director UK of Media iQ, added: "While budgets continue to lack growth, marketers need to ensure they are spending what they do have wisely. Using marketing intelligence tools will ensure that adverts are targeting the right audience, through the right channel, at the right time, in the right moment. Investing in this area will allow for access to data that can inform, not only digital media campaigns for the best possible results but also genuinely impact business outcomes.

"Data science, insights, and AI can be used to influence campaigns through all channels, as well as look to solve business challenges outside of advertising KPIs. As budgets steady, it’s important that planning conversations are opened up across all mediums to truly make the most of what’s available."

2018's growth has been revised up from 0.3%, a projection made in January.

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