UK marketing budget growth at decade high – IPA Bellwether

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Total UK marketing budgets finished 2023 with a robust expansion, with the net balance of companies reporting greater spending at its highest in nearly a decade.

UK marketing sector Q4 2023

That’s according to the latest IPA Bellwether report, which showed the fourth quarter’s expansion came amid an intensely challenging backdrop for UK businesses, with high borrowing costs, persistent inflationary pressures and a looming recession all creating headwinds for growth.

Source: IPA

That said, with the downturn expected to be shallow, and economic activity widely touted to recover in the second half of 2024, many companies opted to remain proactive in the market, instead of withdrawing into cost-saving mode, the IPA wrote.

Slightly over one quarter (26.0%) of panellists saw total marketing budgets rise in the fourth quarter of 2023, more than double the proportion registering cuts (11.3%).

The resulting net balance of +14.7% was up sharply from +5.3% in the third quarter of last year and its highest since Q2 2014 – nearly a decade.

This subsequently extended the current sequence of expansion in total marketing budgets to 11 quarters, the longest uninterrupted period of sustained growth since 2018.

Events strongest

Events was the best-performing sub-category of marketing in the final quarter, recording a strongly positive net balance of +15.9%, its highest in a year-and-a-half (up from +5.9% in Q3).

The IPA noted that direct marketing saw its greatest upturn (net balance of +12.6%, from +4.3%) since the opening quarter of 2005.

These two categories were the principal drivers of total marketing budget growth at the end of 2023 as expansions of a more modest nature were seen in PR (net balance of +1.9%, down from +4.0), main media (+1.9%, down from +7.4%) and sales promotions (+1.4%, from -1.5%).

The slowdown in main media compared with a strong performance in the third quarter, where the category was the top performer, said the industry body.

Underlying data revealed mixed trends, with other online advertising (net balance of +13.2%, up from +9.1%) and video (+6.6%, from 0.9%) contrasting with contractions in published brands (-1.4%, from +0.8%), audio (-7.0%, from -10.8%) and out of home (-8.1%, from -12.1%).

Just two of the seven Bellwether categories recorded a contraction in budgets in the final quarter – market research (net balance of -5.0%, from -1.5%) and other (-6.4%, from -7.9%).

Budget plans 2024/25

The outlook for total marketing budgets in the 2024/25 financial year was remarkably strong, preliminary budget setting data showed.

Latest survey results showed budget expansions at 44.5% of respondents, around triple (15.1%) those that were restricting spending plans in the 2024/25 period.

Consequently, a net balance of +29.4% of companies with stronger budgets than the last financial year showed a robust outlook for UK marketing.

Source: IPA

Commenting on the latest survey results, Paul Bainsfair, IPA Director General, said: “Despite the challenging economic climate, this quarter’s upbeat Bellwether findings show that companies are heeding the evidence that continuing to advertise through the tough times can help maintain brand loyalty and protect the long-term health of their brands.

“However, we also saw anecdotal feedback that some companies noted plans to price their goods and services more competitively in a bid to gain market share.

“While this is good news for the consumer, it is further proof that companies are experiencing a tough trading environment.

“On this point, with the evidence showing that investing in advertising helps protect sales when businesses raise prices, it may prove more profitable for companies to increase their advertising than reduce their pricing.”

Joe Hayes, Principal Economist at S&P Global Market Intelligence, said: “The resilience of UK marketing continues to be at odds with the worsening economic climate businesses are facing.

“Instead, companies are demonstrating the foresight to maintain a longterm view towards their brands, maintaining a healthy level of investment in the tools to stave off competition, retain clients and win new business.

“The UK economy is expected to endure a shallow recession, which will end in the first half of 2024, and our data clearly show more companies are prepared to ride out the bumps to put themselves in a strong position when the recovery phase kicks in than those that aren’t.”