Thursday 15 April 2021 12:01 am

Decline in UK marketing budgets slows amid rebound hopes

Cuts to UK marketing budgets eased in the first quarter, sparking hopes that the easing of Covid-19 restrictions could pave the way for a sector rebound.

Total marketing budgets declined again in the first three months of the year, with a net balance of -11.5 per cent of companies surveyed reporting lower ad spend.

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But the figure was a substantial improvement on the -24 per cent recorded in the final quarter of 2020 and represented the softest rate of decline since the outbreak of Covid at the beginning of last year.

Marketers once again cited lockdown measures as the main drag on budgets. The biggest impact was felt by events, though a contraction was recorded in all seven monitored categories.

Main media suffered a less severe decline than in the previous three months, though it was dragged down largely by reduced spend on out-of-home advertising due to declining footfall on the high street, in shopping centres and on public transport.

Of the more resilient categories other online marketing — which mainly covers search and display ads — was flat after recording growth in the fourth quarter, while video ad spend returned to growth.

The figures, which were published in the latest IPA Bellwether report today, also pointed to cautious optimism among marketers about a recovery for the sector.

A net balance of +17.4 per cent of firms said they expected their total marketing budgets to increase over the next 12 months. 

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This reading signals the strongest growth expectations for ad spend since 2018 and suggests budgets could recover in the next financial year.

Richard Exon, founder of advertising agency Joint, described the figures as “the stirring of the long-predicted rebound”.

“It looks like the next quarter will be much more positive and with the continuous vaccine rollout, the overall business outlook is getting brighter,” he said. “These latest figures further support the quick recovery of ad spend with budgets back on track next financial year.”

More widely the report forecast a 3.5 per cent increase in ad spend this year, with the recovery gaining pace in 2022. However, it warned that the emergence of new vaccine-resistant strains or delays to vaccine rollouts in trading partner nations could put this at risk.

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“With companies’ confidence levels regarding their financial prospects soaring and with almost three quarters of UK companies either revising their marketing budgets upwards or keeping them the same this quarter versus last, the trajectory is very much moving in a positive direction and at a good pace,” said IPA director general Paul Bainsfair.

“As the nation comes out of lockdown consumers will be actively seeking out new products, experiences and entertainment, for which it will be more important than ever for companies to build and rebuild their brand awareness.”