UK marketers marginally increased their budgets in the most recent quarter, seemingly anxious that a predicted lull in consumer spend this year could come true, according to the latest Bellwether Report.
The quarterly survey of 300 senior marketers from the country’s top companies revealed budgets have risen by their smallest amount for nearly three years. A net balance of just 0.5 per cent of companies upped their budgets in the three months to December, which was noticeably down on the 4.4 per cent in the previous quarter.
The shift in optimism suggests marketers are battening down the hatches ahead of what many financial experts will be a tough year. An expected rise in interest rates for the first time in several years could knock customer spend, while fears of the economic fallout from the UK’s potential exit from the European Union crystallise.
“Marketing budget growth eased again in the final quarter of the year, slipping to a near three-year low in line with the softer UK macroeconomic environment that has been evident over the second half of 2015,” said Paul Smith, senior economist at Markit and author of the Bellwether report.
“Moreover, as has been the case in the post financial-crisis world, companies are maintaining a keen sense of cost-consciousness and a value-for-money approach to their marketing budgets. Such forces have probably weighed on growth in the final quarter of the year.”
Indeed, less than a quarter of the companies surveyed (20.4 per cent) are optimistic about their own prospects compared to the previous quarter’s 22.4 per cent and the lowest recorded in 11 quarters. The net balance for wider financial prospects was 7.0 per cent, a slight increase on the 6.8 per cent posted for the third quarter. These fears aren’t new and bear similarities to the same period last year, when the same study saw marketers pare back spend in anticipation of consumers tightening purse strings.
But it’s not all doom and gloom for advertising in 2016; a quarter (24.6 per cent) of companies predict their budgets will rise, most likely propelled by data and incremental media strategies.
And while many marketers admit to being under stricter budget constraints, they’re willing to spend more on cheaper more targeted digital channels, which is why internet marketing posted the highest revision to budgets of all the Bellwether categories, at 6.9 per cent. Within the internet category, spending on search and SEO accounted for 5.8 per cent, up from 0.6 per cent in the previous quarter.
A rise in programmatic budgets may have also contributed to the growth of the internet category in the last quarter, with several studies in 2015 claiming that marketers are using TV budgets to fund a move into automated advertising.
Main media posted slight growth (1.1 per cent), while PR (0.6 per cent) and events (0.6 per cent) also saw marginal gains. Sales promotions (7.7 per cent), market research (7.3 per cent) and direct marketing (1.7 per cent) all suffered drops, along with the category known as other (12.1 per cent).
Paul Bainsfair, IPA director general, said: “While these latest findings reveal inevitable easing due to macroeconomic concerns, there are some positives. Marketers have signalled a marked increase in their budget plans for 2016, both the Olympics and Euros are on the horizon and Bellwether has predicted annual adspend growth of 3.9 per cent. Not a bad start to the year."
Guy Sellers, CEO, Total Media, added: “Uncertainty, both political and financial, will always dent advertiser optimism and, these days, create a flight to the new security of digital media.
"However, as always, one person’s concern is another’s opportunity with, for example the major media events of Euro 2016 and the Olympics.”