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Marketing budgets decline forecast for Q4 with 23% of companies to reduce spend according to latest IPA Bellwether report

Marketing budgets have been revised down for the second successive quarter, with nearly a quarter of companies expecting to reduce their marketing spend due to concerns over the economic outlook, taking figures to their most extreme in three years.

The latest IPA Bellweather survey has found that 23 per cent of companies are likely to reduce their marketing pend, with only 18 per cent stating that they plan to increase their spend. This is the second downward revision of the year, and means that the expected increase anticipated by the survey earlier this year is unlikely to occur.

Reasons given for the downturn in confidence relate to the slowing of the global economy and a lack of resolution to the Eurozone sovereign debt crisis.

Online budgets were revised higher, with the net balance growing from 5.1 per cent to 7.1 percent, with online advertising, search and SEO spend growing by 5.2 per cent, while all other communications categories set to fall.

Below-the-line will decline by the highest degree, it has been claimed, while direct marketing and sales promotion will also decline.

Nicola Mendelsohn, IPA president and executive chairman and partner at Karmarama: “The message provided by the Bellwether survey is consistent and indicative of the economic situation as a whole which is one of underlying stagnation. We had hoped when the year started that things were picking up but as time has gone on the economy has stuttered and confidence isn’t particularly strong. We had hoped for growth but are instead looking at a flat market. Although this is disappointing it is by no means terrible. The outlook for UK economic growth in 2013 is looking better than this year so consequently we are expecting a relative improvement in marketing spend. We shall see what Q4 and the year ahead brings but the advertising and marketing industry is certainly not a market in decline.”

Chris Williamson, chief economist at Markit and author of the Bellwether, added; “Disappointing sales and revenues prompted companies to cut their marketing budgets again in the third quarter, reflecting the weaker than expected economic environment than many had hoped to be operating in. The modest increase in budgets that had been set at the start of the year looks instead to turn into a reduction in spend compared with 2011, as companies seek to reduce costs. It therefore seems likely that marketing spend will have fallen for a fifth successive year.

“The Bellwether is consistent with other surveys which suggest that the official data overstated the weakness of the economy in the first half of the year, but also suggests that economic growth slowed, and perhaps even stalled, in the third quarter. With business confidence falling further in the third quarter, prospects also look rather subdued for the rest of the year.”

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