Ad spend drops as morale crisis hits businesses

MARKETING spending has fallen due to deteriorating business confidence and cost-cutting measures, according to the latest IPA Bellwether report released this morning.

Advertising budgets were hit by weaker-than-expected sales and concerns about the strength of the economy in the last quarter, with executives’ confidence in their own industries falling to -16.8 per cent, and one in three saying they were less bold about prospects than at the start of the year.

The report, based on a survey of 300 British companies, estimated that marketing spending fell in the last quarter, with 23 per cent of companies reporting a budget reduction.

In total 22 per cent of firms surveyed increased spending, meaning there was a slight reduction overall.

Internet advertising bucked the trend, especially in search engine marketing, which saw a 7.4 per cent rise since the previous quarter. Other online advertising increased by 5.4 per cent and companies also spent more on sales promotions in an attempt to attract thrifty customers.

IPA cited the increased spending on internet advertising as “a means to quickly grow sales, especially in a downturn when customers are particularly cost-conscious”.

Executives were more bullish about their own company’s prospects than the outlook in general, with a slight increase in confidence.

IPA president Nicola Mendelsohn said: “With renewed concerns surrounding the economy, in particular the problems surrounding the Eurozone, it’s not surprising the signs are less encouraging.”

Chris Williamson, who wrote the report, said an “upturn in business optimism could soon feed through to higher marketing spend,” and “the Olympics should of course provide a boost during the third quarter”.