IPA’s UK Bellwether Survey: the good news is that things aren’t quite as bad as they were

Ed Balls cals it ‘flatlining,’ others say the UK economy is bumping along the bottom – and clearly advertising is not immune from this stasis.

That’s the message from the IPA’s latest quarterly Bellwether survey of the UK industry anyway. Here’s what it says:

Q1 2013 brought little change to marketing budgets with only a fractional increase registered. With broadly similar proportions of companies reporting rises and cuts, the resultant net balance* was +0.1per cent, down from +1.1 per cent seen in Q4, but still up from the -5.5 per cent seen in Q3.

Companies have grown more positive about their own performance compared to three months ago and to the best seen in a year (with a net balance of +16.8% up markedly from +6.8 per cent in Q4).

Around 36 per cent of marketing executives are planning to raise 2013 budgets relative to last year. Compared to 23 per cent anticipating a fall this is at the best level for two years (net balance of +13.5 per cent).

When asked about the financial prospects for their wider industry marketing executives were again pessimistic, though the least for a year (net balance of -11.1 per cent compared to -16.9 per cent in Q4).

The Q1 results rounded off a difficult 2012/13 year with marketing budgets recording an annual decline for the fifth successive year, and provisional data so far revealing a worse performance than 2011 (net balance of -7.4 per cent versus -1.7 per cent in 2011).

The planned rise in 2013 budgets is also modest compared to pre-financial crisis levels and the continued negativity regarding industry prospects reflects wider concerns about the strength of the economy.

With current projections from the Office for Budget Responsibility (OBR) for UK GDP growth to be just 0.6 per cent for 2013, household spending at 0.5 per cent and business investment to increase by only 1.9 per cent, advertising spend may also find itself under pressure. Using a predictive model created for the Bellwether survey, these key components of economic growth, now point to a fall of -0.3 per cent in adspend this year. However with the economy expected to improve next year this model forecasts adspend should grow at a rate of 2.3 per cent in 2014 before accelerating to 4.4 per cent in 2017.

By sector

The internet continued to lead the way and was revised up to the fastest rate since Q4 2011 (net balance of +8.9 per cent). Within internet advertising, online search/SEO spend was also revised up (+1.8 per cent) but to the lowest since Q2 2009.

Growth was also seen in PR (net balance of +1.8 per cent) and market research (+1.3 per cent).

The rest of the categories all saw declines. Yet events, main media and sales promotion saw only marginal declines (with the net balance for sales promotion the best in three quarters). Direct mail saw a sharper decline (-3.6 per cent) and ‘other’ at -8.9 per cent recorded the lowest net balance of all categories.

IPA director general Paul Bainsfair (left) says: “Marketing spend has been revised up again, albeit marginally, and plans for the 2013 budget period are also more positive as companies expect to raise their budgets relative to last year. Moreover advertisers’ confidence about their own financial prospects has grown markedly and to the highest rate in twelve months. So while there is continued concern about the economic outlook, things do seem to be holding up. We will have to wait and see how the situation pans out as the year progresses.”

Bellwether author Chris Williamson from Markit says:: “An upturn in business confidence and corresponding increase in budgeted marketing spend for 2013 augurs well for the wider economy. However, while the Bellwether is suggesting the economy is recovering, it looks set to be another challenging year for businesses and the pace of economic expansion is likely to be modest.

“The hope among many companies is that increased sales and marketing activity will drive business growth, but firms will need to see convincing signs that demand and profits are improving in the coming months to prevent business confidence falling again and marketing budgets from being revised down as the year proceeds.”

So there you are then. At least the weather’s getting better.

* net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.

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