IPA Bellwether survey shows UK ad budgets up with further rises expected from 2014 onwards

The Q4 2013 IPA Bellwether Report shows a strong upwards revision to marketing budgets, marking the fifth quarter of consecutive growth and the second-highest rate of growth in the survey’s history.

The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +11 per cent of companies registering an increase in budgets during the period (down slightly on the series record of +12.3 per cent in Q3).

Companies also remained highly confident about their own financial prospects with the net balance of firms that have become more optimistic measuring +47.0per cent. Companies are also optimistic about industry financial prospects in the coming months with the net balance unmoved at a series-record high of +35.4 per cent.

This optimism looks set to continue into 2014 with provisional data for 2014 financial year budget plans revealing that a net balance of +25.8 per cent of companies expect to see growth, the most positive reading since 2008.

The Bellwether’s predictive model, which is based on the Office for Budget Responsibility’s prediction for economic growth of 2.4 per cent, forecasts a resultant 3.3 per cent increase in adspend in 2014. In the longer-term, however, the predictive model anticipates a slowing in GDP and consumer spending growth in 2015 which will be offset by an upturn in investment, leaving adspend growth unchanged at 3.3 per cent. A stronger economic recovery thereafter will deliver a more substantial increase in adspend to over four per cent in 2016, 2017 and 2018.

By sector

Internet spending budgets again recorded the sharpest improvement with a net balance of +9.2 per cent. In this search also recorded an increase of (+3.8 per cent although this is the lowest recorded rate of growth for both since Q1 2013.

Sales promotion (+1.9 per cent), events (+1.8per cent) and direct marketing (+1.2 per cent) also saw growth.

Main media advertising saw no change to budgets since the previous quarter, but falls were recorded elsewhere including PR (-2.8 per cent), Market Research (-2.5 per cent) and other paid for marketing activity (-2.3 per cent).

IPA director general Paul Bainsfair says: “The latest Bellwether Report findings once again will send an upbeat message to the advertising industry and the UK economy at large. With the current run of growth in marketing budgets now extending to five quarters, it seems companies are spending again to drive business growth. Confidence remains high as the economic situation continues to improve.

Bellwether author Markit chief economist Chris Williamson says: “The survey indicates that marketing budgets are set to rise in 2014 to the greatest extent since 2008 as the UK’s economy recovery becomes more entrenched. The survey showed increasing numbers of companies setting their budgets higher than 2013 on the back of very buoyant optimism about their financial prospects.

“The upbeat picture for 2014 comes on the back of another strong increase in marketing and advertising spend late last year. One of the most encouraging signals from the survey is the indication that companies are feeling more confident about investing in advertising to build brands, supporting new product launches and taking the plunge in being more aggressive about boosting revenues. This increase in risk appetite should add to the sustainability of the economic recovery.”

The full survey is available from the IPA website.

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