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Political certainty sees marketing budgets increase, finds IPA report

The decisive general election result in December gave a boost to UK marketing expenditure during the final quarter of 2019 according to the Q4 IPA Bellwether Report, with data showing modest growth for the first time since the start of 2019.

This followed on from stagnant spending activity in the two previous quarters as uncertainty, client hesitancy and weak confidence led to a subdued business climate and delayed decision making.

Paul Bainsfair, director general of IPA, said: “This latest IPA Bellwether Report demonstrates the extent to which UK marketing budget planning has been at the mercy of the unstable political environment. Over the past year we have seen a stagnation in marketing budgets, culminating in a below zero score last quarter. And yet now, with the clear result of December’s general election, we are seeing a return to positivity in terms of UK companies’ confidence regarding their own financial prospects and in terms of their budgeting plans – up marginally this quarter and significantly for 2020/21.

“With Brexit still looming, I’m sure it won’t be plain sailing, but these forecasts provide an upbeat outlook for the year ahead for UK plc, their marketers and of course the agencies that work with them to grow their businesses.”

A net balance of 4 per cent of surveyed firms revised their total marketing budgets higher in the fourth quarter. While still a modest increase, this represents the strongest expansion since the start of last year. Almost one quarter (23 per cent) of companies observed budget growth, while around 19 per cent reported cuts, leaving the remaining 58 per cent with an unchanged spending allocation.

Revisions to event marketing budgets

Revisions to event marketing budgets

According to the latest Bellwether survey, the preliminary outlook for marketing spending in the 2020/21 budgeting year appears promising. A net balance of +15.7 per cent of companies expect their total marketing budgets to be upwardly revised, a significant improvement from the 2019/20 forecast (+3.4 per cent).

The renewed wave of optimism follows on from a subdued year in 2019, when budgets were frozen amid high uncertainty and a weak economic climate. While a number of panellists still expressed concern towards the outcome of Brexit, others expect to see a bounce in business following the general election and the subsequent alleviation of political uncertainty.

Back-to-back cuts to events marketing budgets were seen in the final two quarters of 2019, the first time in which this has been the case since 2013. According to latest survey data, a net balance of -1.1 per cent of firms recorded downward revisions to their marketing budgets reserved for events. Although this was less negative than in the third quarter (-5.9 per cent), it was only the third contraction to events budgets in more than six years. That said, Bellwether panellists are strongly optimistic towards events marketing budgets for the 2020/21 financial year. According to preliminary data, a net balance of 11.9 per cent anticipate growth, the most bullish expectations across all categories for which initial budget plans are collected.

Joe Hayes, economist at IHS Markit and author of the Bellwether Report, said that there were a number of positives to take from the survey.

“The rise in total marketing budgets provides tentative signs of a momentum shift, particularly when coupled with preliminary data for the 2020/21 budget year,” he said. “It appears that firms are looking to release the pent-up investment which has been put on hold amid the high degree of political and economic uncertainty which has plagued the UK business climate for well over 12 months now.

“Nevertheless, while these positive developments will perk up enthusiasm for marketing budgets in the coming year, downside risks to the outlook remain at large, particularly if a business cycle recovery does not fully materialise and Brexit uncertainty descends again.”