UK advertisers fret about spending cuts, higher taxes

They seem to be anyway as the IPA’s latest survey into advertiser intentions shows that 22 per cent of those surveyed cut their budgets in the last quarter of 2010 against 17 per cent that increased them. The IPA represents UK advertising, marketing and media agencies.

All is not doom and gloom however, on balance UK marketing budgets are still set fair to increase in 2011 although not by as much as some of the optimists hope.

At the same time the Advertising Association has reported that UK ad expenditure grew by 6.6 per cent in 2010, better than it anticipated, while WPP’s Group M says it expects worldwide ad revenue to top $500bn for the first time in 2011 with the US growing by 3.9 per cent and Western Europe by 2.5 per cent.

So it’s the usual of mish mash of fact and opinion and, as we’ve said before, forecasts of marketing expenditure are notoriously unreliable, 2010 saw a slew of them that turned out to be completely wrong on the downside and which were rapidly revised.

As far as the UK is concerned there seem to be a few reasons why the startling growth in ads during 2010 will come under pressure in 2011.

The coalition’s government’s public spending cutbacks intended to cut the national deficit will hit purchasing power in the economy generally as hundreds of thousands of public sector workers lose their jobs. This will be compounded by the increase in VAT to 20 per cent although retailers are clever at absorbing such rises. At the moment most of the big ones have enough cash in their coffers to ignore the rise until they deem consumer confidence to have recovered.

So marketers may worry about their return on investment and decide to hang on to more of their cash.

But big UK companies, like their peers in the US and across the world, are mostly doing quite nicely thank you, particularly those that export to faster-growing economies in Asia and the Far East.

And ad levels in 2010, even at booming ITV, only clawed their way back to the pre-recession levels of 2008 so there is ample room for further, pretty run of the mill growth as the global economy continues to recover.

Even the battered old UK won’t be immune from this trend so we can expect marketing spend and adspend (the two aren’t the same of course) to resume their upward path, certainly in the second half of the year, and by rather more than 2.5 per cent.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.