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IPA Bellwether: political uncertainty puts UK marketing budgets on ice

Boris Johnson, Jeremy Corbyn and Brexit blamed for ad spend slump / Conservatives YouTube

“Boris, Jeremy and Brexit” are to blame for a slump in UK marketing spend according to the director general of the IPA.

Speaking ahead of the release of the Q2 2019 IPA Bellwether Report, which has seen a three-month window of 8.7% budget growth reduced to 0.0%, Paul Bainsfair blamed the drop on uncertainty over the nation’s political and economic prospects.

A total of 300 UK-based companies shared their budgets and outlook. The IPA reported 34% of them to be pessimistic about future budgets, while only 8% were optimistic.

This saw a net balance of negativity – the second-worst outlook since Q4 2011.

Hopes of sustaining a second consecutive quarter of budget growth were quashed after net spend growth decreased to 0.0%. Just 20% of panel members reported greater budgets, and this was completely offset by another 20% cutting expenditure. 60% said budgets remained the same.

The IPA found broad anecdotal evidence pointing to ambiguity over Brexit, the UK’s future leaders and the nation’s financial status.

“This created hesitancy among clients and delayed decision making," said the association.

Meanwhile, consumer confidence has also reportedly taken a knock. “Difficult conditions domestically were damaging consumer confidence and impacting consumption," the report found.

Growth was reported in in several sectors, however.

Internet marketing saw net growth of 11.5% (down from 17.2% the previous quarter). Internet search and SEO budgets continued to grow at the reduced rate of 9.9% (against 14.2%).

Main media budgets actually rose in the first quarter to 5.6% from 5.2%.

The report suggested: “Big-ticket marketing campaigns were being used to build brand recognition and expand customer bases. There were also suggestions that marketing was being deployed as a defensive strategy due to increased competitive pressures.”

Events was the final sector to grow, up 4.8% against 3.4%.

Declines occurred in market research (-2.9% from -4.2%), PR (-5.2% from 0.0%), sales promotion (-7.1% from -3.7%), 'other' (-12.8% from -5.4%) and direct marketing (-9.0% from -3.5%).

Overall, the report still predicted a 1.1% annual increase in adspend over the year.

Bainsfair wrote: “Between Boris, Jeremy and Brexit, coupled with a dip in consumer confidence, it is perhaps no wonder that this quarter’s Bellwether shows zero growth to overall UK marketing budgets. Until a clearer political and economic path is outlined, the vast majority of companies are in stasis.

"It is reassuring to see, however, that some companies are revising up their investment in main media advertising; this is where they will build the longer term growth of their brands, which is crucial to weathering these tougher times.”

Joe Hayes, economist at IHS Markit and author of the Bellwether Report, added: “The expansion in marketing budgets during the first quarter proved short-lived, but developments in the wider economy during Q2 have shown that more intense challenges lie on the horizon for UK businesses. Given the economic and political uncertainties that remain at large, a neutral stance towards budget setting appears fully justified."

Industry views

Nicole Lonsdale, chief planning officer, Kinetic UK, said: "From an out-of-home (OOH) perspective, it’s promising to see that main media advertising budgets have seen growth since the last quarter. This shows that even in today’s uncertain political and economic climate, marketers know that it’s important to invest in mediums that deliver on long term brand building performance.

"The continued rise of digital out-of-home (DOOH) is providing brands with ever-increasing dynamic and contextual creative opportunities."

Hugo Drayton, chief executive of Inskin Media predicted a short-term contraction of the UK economy and said the budget freeze comes from "defensive marketing positions, delayed decision-making and prudence around cash conservation".

"Certainly, the short-term is characterised by both economic and political instability, further fuelled by international trade disputes, as well as weak growth in major European and Asian markets; so the caution is not simply a reflection of the UK's parochial dilemma."

Natalie Richardson, senior director at agenda21, said that marketers continue to strive "to build and maintain better relationships with their customers, and the good news for us is that digital spend is still growing as marketers recognise and truly value the role digital plays in those relationships".

"Our role as agencies is to help them find smarter ways to do that and to de-risk their media spend, helping them to be more agile and fluid in the investments that are making. With the data and technology we have available, we are in the privileged position of being able to focus on the metrics that really matter and help marketers make more informed decisions within their businesses.”

Mazen Hussain, director of paid media and Creative at Croud, noted that it has been a "pretty bumpy run of Bellwethers the last few quarters".

"It shows that there is still significant investment happening, with many underpinning main media brand-building spend with strong online presence. The challenge for marketers is to never rest on our laurels, and to be innovative in the ways we deliver results, whether that’s by investing in technology to streamline processes, or capitalising on new and unusual creative formats to catch people’s attention with less competition at lower costs.”

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