UK marketers cut first quarter 2011 budgets on slowdown fears

British companies cut their marketing budgets in the first quarter of 2011, for a second
consecutive quarter, over fears that public spending cuts and rising inflation would dent the economy.

The survey of around 300 British-based companies for the IPA/BDO Bellwether report found 25 per cent had cut spending compared with 20 per cent that reported an increase.

The net balance of -5.1 per cent was the second-lowest in five quarters, it said, and only marginally better than the fourth quarter, which was the lowest at -5.4 per cent.

“The reduction in marketing budgets for the second successive quarter supports our anecdotal evidence that companies are taking a cautious approach to marketing
expenditure,” says Andy Viner, head of media at accountancy firm BDO.

Viner said companies were cautious against a backdrop of continuing economic uncertainty, subdued business confidence and mixed fiscal indicators in recent weeks.

The report said marketing budgets were also being trimmed in a bid to protect margins at a time of increasing cost pressures.

The UK economy shrank by 0.5 per cent in the final quarter of last year and recent mixed economic news has sparked fears about its condition although inflation did ease unexpectedly in March to four per cent, the first fall since last summer.

Media across the UK, most notably ITV and the rest of the commercial television sector, benefit strongly from a post-recession bounce back in 2010.

These figures will add to pressure on the UK coalition government to slow the pace of cuts to public services while growth is weak.

UK companies are sitting on piles of cash according to another recent report from the Ernst & Young Item Club, which uses the UK Treasury’s own economic model.

With consumers struggling to spend faced with high inflation and wages rises running at two per cent or less (zero in the public sector which accounts for 40 per cent of the economy) there will be intense political pressure on the UK’s bigger companies to loosen their purse strings.

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