Thursday 17 October 2019 12:01 am

UK companies cut marketing budgets for first time in seven years

UK companies have cut their marketing budgets for the first time in seven years as ongoing uncertainty has forced bosses to keep a tight control over spending.

A net balance of -0.5 per cent of companies reported a reduction in their marketing budgets in the third quarter, according to the Institute of Practitioners in Advertising’s (IPA) latest bellwether report.

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The fractional decline, which is the first since 2012, highlights the underlying hesitancy as businesses grapple with uncertainty over Brexit.

Some respondents said the lack of clarity warranted a “wait-and-see” approach, while others said a drop in consumer confidence had prompted them to hold off on big-ticket marketing campaigns.

Other marketing bosses said their marketing budgets had remained unchanged, but they had shifted focus to online and social media-based campaigns. Overall, nearly two-thirds of respondents reported no change to their overall marketing budgets.

“It’s a false economy to cut one’s ad budget when things look uncertain,” said IPA director general Paul Bainsfair.

“The evidence shows that far from being prudent, it can have a negative long-term effect on growth. Companies that hold their nerve consistently, and that invest in the 60:40 ratio of longer-term brand building to shorter-term sales activation, outperform the market.”

The report also highlighted the continued shift towards digital marketing, with online ad spend remaining the best-performing category in the third quarter.

While a net balance of 11.1 per cent of firms increased their budgets in the digital marketing sector, main media budgets were put on hold during the quarter.

“The latest bellwether survey spells further disappointment for the UK marketing industry, which is suffering, just like the rest of the economy, as a result of spending delays, firms placing projects on hold and subdued business confidence,” said Joe Hayes, economist at IHS Markit.

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“Perhaps the most discouraging sign is to see firms sitting on the fence regarding main media advertising, which is a vital form of long-term brand building, following resilient budget growth in the two previous quarters.”

The IPA left its ad spend forecasts unchanged, saying it remained cautious towards 2019. However, it predicted a boost in ad spend after uncertainty has cleared, forecasting growth of 1.8 per cent in 2020.

Main image credit: Getty