Thursday 21 January 2021 12:01 am

UK marketing budgets slump as Covid impact lingers

UK marketing budgets continued their sharp decline in the fourth quarter as the Covid-19 pandemic continues to wreak havoc across the economy.

Advertising spend suffered a record drop last year, with the sharpest fall reported in the wake of the first nationwide lockdown in the second quarter.

While activity has picked up from lows earlier in 2020, continued uncertainty over the virus and fresh lockdown measures mean budgets have suffered their fourth consecutive quarter of decline.

A net balance of -24.0 per cent of marketers recorded a decline in their budgets in the last three months of the year, according to the latest IPA Bellwether Report.

This was less severe than the declines of -51 per cent and -41 per cent recorded in the second and third quarters respectively, but highlighted the continued impact of cost cutting.

Events budgets were the hardest hit, with a balance of -63 per cent of firms reporting lower available spend due to continued cancellations.

Within main media advertising, out-of-home remained the worst performing category due to declining footfall on the high street, in shopping centres and on public transport.

Only other online marketing — mainly search and display ads — recorded a positive net balance of growth at 0.7 per cent.

Marketers remained downbeat about the outlook for their sector, with a net balance of -5.8 per cent of respondents expecting financial prospects to deteriorate over the coming year.

Despite this, there were some glimmers of hope. A net balance of 12 per cent of firms said they expected marketing budgets to be lifted over the coming financial year.

Current figures from IHS Markit predict a 6.9 per cent and 6.2 per cent growth in ad spend in 2021 and 2022 respectively, though this could be threatened by delays to vaccine rollouts.

Martin Vinter, managing director of media, at marketing consultancy Ebiquity said the figures were “unsurprising”, but added there was “light at the end of what has been a very dark tunnel”.

“Optimism is on the horizon — budget plans for the year ahead are looking beyond the ongoing uncertainties and towards recovery.”

Anne Stagg, UK chief executive of ad firm Merkle, said: “We can be cautiously optimistic for the year ahead, which will include the roll-out of the vaccine and, fingers crossed, the easing of lockdown. 

“The industry has proved robust, despite budgets, as it’s rapidly evolved to meet the developing needs of a much-changed world last year.”