Advertisers and marketers are trimming budgets and confidence is slipping ahead of the Brexit referendum in June, according to the Bellwether Report produced by the Institute of Practitioners in Advertising.
Marketing spend rose for the 14 successive three-month period in the first quarter of 2016, but uncertainty ahead of the vote in June and other macro economic factors are combining to dent enthusiasm for increased spend.
There was a positive of 3% in terms of companies increasing their marketing spend beyond expectations in the first quarter, but confidence in the longer term has dropped. This fell from a +7% score in Q4 2015 to -6.5% in Q1, the lowest level since 2013.
Despite this, the individual marketing executives report that they will be spending more in 2016/17. As a result the report projects an overall 3.3% increase in advertising spend for 2016.
IPA director general Paul Bainsfair says: “It is good to see that marketing budgets have now been revised up continuously for three-and-a-half years. However, with confidence waning the outlook appears mixed.
“Following the referendum in June, the summer Bellwether should hopefully provide better clarity on where we are headed. On balance some growth seems the most likely outcome especially with the European football championships and Olympics set to provide a shot in the arm to budgets in the immediate months ahead.”
The strongest revision to budgets is coming from spending on the internet, up 9.8%; event budgets are up 6.3%. On the other hand, budgets for spending on sales promotion are falling by 8.4% and direct marketing by 4.9%.
The growth in direct mail budgets had been considered a success for the printing industry and it will be bad news if budgets are to fall, even by less than 5%. This may be a reality check after increases in spend in this area recently and could increase after the referendum vote.
Paul Smith, author of the report and senior economist at Markit, says: “The latest Bellwether survey leaves the impression that marketing executives are currently living in a period of flux.
“On the one hand, economic and financial prospects have taken somewhat of a nosedive – probably not helped by uncertainty around EU membership – and that has led to those holding company purse strings to adopt ongoing prudence and caution when committing funds to areas such as marketing.
“While this inevitably has led to downward pressure on budgets, steady sales flows are encouraging new product development and enabling marketing executives to eke out some modest growth in funds.”
The IPA’s Bellwether Report on marketing confidence, finds that budgets generally increased in the first three months of this year, but that as the referendum vote comes closer, the outlook is marked by uncertainty.
