Marketing budgets at near 8yr high, but headwinds persist – IPA

ipa bellwether report 2022 - Image by Nattanan Kanchanaprat from Pixabay

Total UK marketing budgets were revised up to an almost eight-year high during the opening quarter of 2022, according to the latest IPA Bellwether Report, with UK companies stepping up efforts to position their businesses for growth as pandemic-related risks recede.

IPA Bellwether

According to Bellwether data, total marketing budgets were upwardly revised by nearly one-quarter of panellists (24.1%). 

By contrast, 10.0% of companies recorded budget cuts, yielding a net balance of +14.1% in Q1 2022 (vs. +6.1% in Q4 2021). 

This was the highest since Q2 2014 and marked a fourth successive quarter in which marketing expenditure has expanded.

Events back on

Crucially, the IPA report noted that the top-performing segment during the first quarter was events, with a net balance of +18.7% (from -3.9%). 

The switch to a “living with COVID-19” strategy within the UK, alongside a further easing of pandemic restrictions during the first few months of the year, gave businesses the confidence to plan larger-scale gatherings with clients and set up exhibitions. 

Solid budget expansion was also seen in main media (+9.4%, from +3.1%), with other online (+18.6%), video (+9.0%) and published brands (+1.3%) driving growth in this segment. 

Out of home and audio continued to decline, however (-4.6% and -8.5% respectively). 

Elsewhere, sales promotions (+8.0%, from 0.0%) and direct marketing budgets expanded (+6.0%, from +3.8%). The final category to register growth was PR, although the expansion here was only marginal (+0.6%, from +2.0%).

The overall upturn in total marketing budgets was however slightly weighed down by market research (-3.5%, from +7.0%) and the “other” segment, which accounts for any other form of paid-for marketing not included in the survey (-0.9%, from -11.2%).

Budget plans 2022/23

The outlook among surveyed marketing executives with regards to their budgets for the 2022/23 period was strongly positive, with 43.8% of respondents anticipating growth in their available marketing spend in the coming year. 

This compared with 10.6% that expect cuts, resulting in a net balance of +33.1%.

All monitored marketing activities are set to receive budget expansions, led by events (+22.1%). 

This was closely followed by main media (+20.1%), while direct marketing and sales promotions are also set for strong growth (+14.0% and +13.6% respectively). 

Meanwhile, budgets for “other” marketing activity, PR and market research are also all predicted to increase (+11.1%, +10.2% and +8.6% respectively).

Business sentiment remains mixed 

Regarding their industry as a whole, the IPA survey respondents were more pessimistic than they were three months ago, with a net balance of -3.6% of companies downbeat in the first quarter of the year. 

This was broadly unchanged from the fourth quarter of 2021 (net balance of -3.8%) and therefore the second-greatest degree of pessimism for over a year. 

The 27.4% of companies that were negative more than offset the 23.9% that were upbeat.

Company-own prospects were more positive, however, as a net balance of +6.6% of companies were optimistic in their outlook. 

That said, this was down from +7.6% previously and the weakest reading since Q3 2020. 

Close to one-third of panellists (31.5%) were upbeat with regard to their business’ prospects, compared to 24.9% that were more pessimistic than three months ago.

2022 and 2023 adspend forecasts lowered 

The post-COVID-19 recovery faces strengthening headwinds, namely high inflation and a squeeze on household budgets, supply chain disruptions and labour shortages. 

The situation is now more precarious, with Russia’s invasion of Ukraine accentuating and extending an already-damaging cost of living crisis. 

As a result, report author S&P’s GDP growth forecasts for 2022 and 2023 have been revised lower to 2.8% and 1.2% respectively (from 4.0% and 1.8% respectively). 

It anticipates this slower growth trajectory for the next 18 months or so to weigh on adspend. 

As a consequence, Bellwether adspend growth forecasts for 2022 and 2023 have been revised down to 3.5% and 1.8%, from 5.2% and 2.5% respectively.

Looking beyond the next couple of years, Bellwether forecasts for GDP and adspend are little-changed. 

There has been some uplift for 2024 growth projections (GDP and adspend growth revised up to 1.2% and 1.7% from 0.9% and 1.3% respectively) because of the weaker outlook until 2023, while 2025 and 2026 forecasts are held broadly unchanged since the last Bellwether report.

See also:

Publicis beats expectations in ‘very strong’ start to 2022