The UK’s advertising market is expected to shrink this year and next after last month’s Brexit vote.
The IPA Bellwether Report has downgraded its adspend forecast for this year from 3.3 per cent growth to minus 0.2 per cent.
And the market is expected to shrink further next year, by 1.3 per cent, down from the previous outlook of 2.7 per cent growth.
Paul Bainsfair, IPA director general, said: “While the uncertainty in the economy caused by the vote to leave Europe continues to linger, we will experience an inevitable period of flux – as reflected in the Bellwether’s downgrading of adspend forecasts.”
IPA’s report covering the second quarter of 2016 found 10.7 per cent more companies registering an increase in their adspend budgets, up from a three per cent growth in the first quarter.
But despite this growth, the IPA said its survey – which was answered by a “vast majority” before the EU referendum announcement – “hinted at some uncertainty among marketers”.
A record 68 per cent of marketers signalled a freezing of their budgets over the quarter. And IPA also reported an increasing degree of pessimism on the industry’s prospects among marketers, with sentiment at its lowest level for 13 quarters.
“The latest data showed that marketing executives were continuing to enjoy success in raising their budgets in the run-up to the results of the EU referendum, with the implied rate of growth the best for a year,” said Paul Smith, senior economist at Markit and author of the Bellwether Report.
“The devil was, however, in the detail as an increased proportion of panellists indicated a freeze in budgets over the past three months.
“This observation gives credence to the notion that Brexit uncertainty was already impacting on decision-making, with an increased number of companies taking a cautious approach to budget setting, pushing marketing departments to utilise existing resources but concurrently asking them to meet goals of raising brand awareness and sales in an increasingly competitive environment.”
He added: “With Brexit now more likely to happen – and the widespread belief that the UK will subsequently experience a period of sustained economic turbulence – marketing executives, their budgets and the wider industry inevitably seem set for a challenging period in the months ahead.”