The Advertising Association (AA) has broadly welcomed a reduction in UK interest rates announced this morning ass the government steps up measures to protect the economy from the global Coronavirus crisis.
The Bank of England slashed the headline borrowing rate by 0.5% to just 0.25%, bringing the closely watched metric into line with its lowest ever level recorded since August 2016.
A spokesperson for the AA said: “This morning’s news from the Bank of England about the change in the base rate is welcome news for the UK advertising industry. We know that additional support around cash-flow for the many thousands of SMEs operating in our industry will be a strong, supportive measure to aid business planning during the fluid and fast-moving nature of the situation surrounding Covid-19.
“It is too early to tell what its overall effect will be on the advertising industry, ad spend and the wider economy at this time but signs such as the cancellation or postponement of events including SXSW and Advertising Week Europe are indicative of an industry experiencing pressures. While the circumstances are different, comparisons can be drawn with the economic shock of 2008 and 2009. Experience shows much of the spend at the time was delayed and returned the following year. This positive move by the Bank will help businesses navigate through this period of uncertainty.”
The AA continues to monitor unfolding events closely amid fears that the contagion could precede a slump in ad spend, for which early indications have already appeared from the likes of ITV as travel firms scale back their Spring campaigns.
Elsewhere, IPA director general, Paul Bainsfair, commented: “Given we’re seeing the biggest threat to global finances for over a decade, it seems inevitable that UK marketing budgets will take a hit. We’ll begin to see the impact of this in next month’s Bellwether Report. Unfortunately, just as we were starting to see a recovery to budgets following the prolonged bout of uncertainty brought on by Brexit, we are propelled into far more extreme global uncertainty.
“From brand awareness to brand building, we know that advertising has enormous power to transform businesses, and can be especially powerful during a downturn. Anything that Government can therefore do to help secure businesses, so that we can help grow them and our own agencies, will be much needed.”
It's not all doom and gloom however with signs that shifting ad spend could benefit subscription providers, e-commerce platforms and live-streaming services as consumers hunker down at home.