Thursday 22 October 2020 12:01 am

UK marketing slump continues after Covid-19 sparks record decline

British companies reported another “drastic” cut in marketing budgets in the third quarter after the outbreak of coronavirus sparked the largest ever decline in spend.

The Covid-19 pandemic has prompted a sharp drop in ad spend across all formats, with negative sentiment leading marketers to slash budgets.

A net balance of -41.0 per cent of UK firms reported a reduction in their marketing budget in the third quarter, according to the latest IPA Bellwether report.

This marks the second-fastest quarterly decline since the survey was created in 2000, second only to the record -50.7 per cent decline recorded in the second quarter of this year.

Over half of respondents reported a decrease in budgets from three months ago, compared to just 11.6 per cent citing an increase.

Marketers blamed the downturn on reduced revenue as a result of the Covid-19 crisis, with executives often cutting ad budgets in a bid to maintain profitability.

Paul Bainsfair, director general of the IPA, said the marketing sector was “at the mercy of macro trends”.

“While the second quarter marked the nadir for UK marketing budgets, we had hoped for a slightly sharper rebound to UK marketing budgets this quarter than we see here,” he said.

“With a second wave of Covid-19, coupled with ongoing Brexit negotiations, including bracing for no-deal, I think green shoots in the immediate term are increasingly unrealistic.”

The report showed that the downturn has taken its toll on all marketing categories.

Events, which have largely been cancelled since March, were the hardest hit, with a net balance of -64.1 per cent of firms registering downward revisions compared to last quarter.

Within main media advertising, online campaigns were the least badly affected, with a negative balance of just -6.5 per cent reporting lower funds.

Audio, video and published brands all posted improvements on the second quarter, but remained subject to significant cuts. Out-of-home advertising, which has been among the hardest hit subsectors during the pandemic, improved from -61.2 per cent to -50.0 per cent.

“The record reduction in budgets, and recurrent Covid-19 lockdown restrictions have left the industry low on both confidence and optimism,” said Azlan Raj, chief marketing officer for EMEA at Merkle.

But Raj said there were ways for brands to “get ahead of the curve” and return to growth.

“As we try and get back to normal, consumers are still very much unsettled by what’s going on in the world, and not just Covid-19, but the US election and Brexit too,” he said.

“Brands that can truly support their customers to navigate safely through the stormy waters of 2020, have much to gain.”

The report showed that despite some improvements since the second quarter, marketing chiefs remained pessimistic about the outlook for both their companies and the wider industry.

Overall, it forecast a 23.3 per cent fall in advertising spend for 2020, though it forecast that spend would bounce back 11.3 per cent next year.

“These outcomes, however, hinge largely on positive outcomes regarding the evolution of the pandemic and the development of Brexit negotiations before the end of the transition period at the end of this year,” the report added.