UK ad spend will only grow by 0.3% in 2018 according to the Institute Practitioners in Advertising's (IPA) latest Bellwether report.
Despite tailwinds from tentpole events like the Winter Olympics and the Fifa World Cup, ongoing uncertainty around Brexit negotiations and a slowdown in the rate of digital ad spend growth have paved the way for modest overall progress in the 12 months ahead.
With the door firmly closed on 2017, the IPA has revised its ad spend growth forecast for the last 12 months to 1.4%, having previously capped it at 0.6%. The mark up, it noted, was due to business investment showing some unanticipated buoyancy.
However, there was a loss of momentum in the final three months of the year.
23.9% of marketers increased their budgets in Q4 of 2017, but 15.2% made cutbacks, which resulted in a positive net balance of just 8.6% growth; a figure that marked the weakest rise in budgets in two years.
Digital and 'big ticket' spend in 2017
The IPA's quarterly report, which features original data drawn from a panel of around 300 UK marketing professionals, found that in the final quarter of 2014 budgets of UK private sector firms noted a net balance increase in overall digital marketing spend to the tune of 10.9%.
While this number helped budgets continue to ride the same positive upwards trend they have been riding for eight-and-a-half years, 2017’s Q4 growth was sluggish compared to the Q3, which sat at 17%. Indeed, the final quarter of the year noted the slowest growth curve since Q3 2016.
This trend could be down to a number of factors, including digital media's prominence in the headlines throughout 2017. The year was bookended by YouTube's ongoing brand safety scandal, while household brands afforded the medium greater scrutiny - raising questions about transparency, efficiency and ad fraud.
Towards the end of 2017, Google and other digital players sought to assuage clients, inking cross-industry pledges and running their own initiatives to "clean up" the digital supply chain.
Main media advertising, returned a modest net balance growth in spend at 1.7% (from 0.0% in Q3). However, internet is a sub-component of the main media category, meaning the latest data implies a disappointing quarter for spending on more traditional formats like TV, press, cinema and radio.
Dr Paul Smith, Director at IHS Markit and author of the Bellwether Report said this shows while firms are willing to expand in perceived cost-value areas such as digital they continue to do so by "weighing down on budgets related to traditionally bigger-ticket main media campaigns."
Overall, more than one in 10 advertisers allocated more than 50% of their marketing budgets to digital.
Brexit and 'economic uncertainty'
Bellwether respondents indicated that company financial prospects remained in positive territory in Q4, with a net balance of +10.6% of marketers more optimistic than three they were three months previous. However, the latest reading was slightly down on the previous quarter’s +11.1% and remained below the average for the survey to date.
Overall, firms were pessimistic about wider industrial prospects, with a net balance of -12.1% of companies becoming less confident when compared to three months ago (-8.2%).
For Michael Todd, head of ad industry relations at Google, the unpredictability of the UK's impending EU exit is something marketers are likely to be grappling with for a while.
"Overall economic uncertainty as a consequence of Brexit is a factor that our industry will have to consider for the foreseeable future, as we address the impact this will have on businesses and consumer confidence," he said.
Despite this, he pointed to the fact that there is still "a cause for optimism that shouldn’t be forgotten" citing both positive results for SEO spend and the fact that since the end of 2012 marketing budgets have been on an upward trajectory.
Meanwhile, Simon Harwood, head of strategy at independent media agency The 7 Stars, preicted the slowdown in ad spend growth seen in 2017 "may well grind to a complete halt" later this year as some advertisers adopt a wait and see approach to Brexit.
"In uncertain times the temptation is always to increase investment in short-term activation channels so it’s no surprise that the internet sub-category outperforms other channels," he added.