Marketing firms confident even as budgets stall

MARKETING bosses in the UK are increasingly confident of economic recovery, even if they are not seeing green shoots yet, research released today shows.

The Institute of Practitioners in Advertising (IPA)’s Bellwether report – a survey of hundreds of British marketing companies taken as an indicator of the wider economy – found that bosses are more confident about their business’s prospects now than at any point over the last year.

However, marketing budgets in the first quarter of 2013 – a more reliable indicator of current economic output – were almost flat on the previous three months, suggesting little growth in recent months.

Bosses expect advertising budgets to actually fall in 2013, with growth set to improve in the following years. Companies’ advertising budgets are believed to be a reliable indicator of economic activity since they reflect both individuals’ and other businesses’ purchasing power.

Revisions to total marketing budgets

The net balance of companies reporting increasing budgets against those reporting decreases – the IPA’s measure – was a paltry 0.1 per cent, although this was the second successive quarter the indicator has been positive. Meanwhile, the net balance of companies saying prospects were improving was 16.8 per cent, the highest level since the same period last year.

“An upturn in business confidence and corresponding increase in budgeted marketing spend for 2013 augurs well for the wider economy,” Markit’s Chris Williamson, who authored the report, said. “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.”

Internet advertising was by far the biggest driver of the slight increase in budgets, with a net balance of 8.9 per cent seeing rises. Direct marketing – such as emails and flyers – and more traditional media advertising saw a slight net decrease.

For the year to the end of March, budgets fell for the fifth year in a row, with bosses seeing a net decline of 7.4 per cent.