The Bellwether quarterly report from the Institute for Practitioners in Advertising (IPA) has been released, showcasing that UK marketing budgets have drastically declined since the financial recession in 2008/09 due to the ripple effects of the Coronavirus pandemic.
According to the data, which drew results from a panel of around 300 UK marketing professionals from the UK’s top 1000 firms – the impact of the global pandemic has caused many budget cuts and paused from multiple businesses in the UK.
However, the report indicated that marketing spend will recover from the economic client in due course in 2021.
Tallying the percentage of respondents showing revised versions of their marketing budgets minus those that indicated a drop, the report recorded a net balance of -6.1% of UK firms reducing their budgets since the start of 2020. In addition, 25% of respondents recorded a budget cut, compared to 18.9% signalling growth.
The net figure marks a notable change from Q4 last year when the net balance stood at +4.0%. The figures also come at a time when big global brands including Coca-Cola and Airbnb are freezing or reallocating advertising spend elsewhere.
When it comes to which areas have been impacted most, market research budgets were identified as the biggest impacted by the pandemic, with a net balance of -21.0% of companies reporting a downturn.
Meanwhile, events saw a net balance drop of -15.9% followed by the PR sector with -14.3%.
In addition, direct marketing and sales promotions saw slow reductions, with net balances of -6.6% and -7.2% respectively.
The IPA also noted the key brand-building category (which includes online video, TV, cinema and radio) had recorded its strongest downward revision since 2009 at -9.9%.
“Understandably, this report presents a negative picture of the industry, the data was gathered at a time when events were still unfolding and we don’t expect to see the full effects of the situation until this quarter. The causes of this downturn come from unprecedented global circumstances, yet we can apply learnings from previous times of economic crisis, and know companies that maintain some marketing efforts will most likely reap the rewards and rebound quicker,” said Fran Cowan, VP marketing at International Advertising Association, UK.
“However, it’s important to do this in a controlled way. Now is the time to carefully consider where marketing budget is best spent, to look after employees, partners and suppliers as well as protect brand images. Luckily in the UK, we have an industry that pulls together during these times. We’ve already seen some great collaborative thinking and initiatives that support the notion of ‘advertising for good’.” Cowan added.
Ad spend recovery?
The IPA Bellwether Report used IHS Markit’s latest forecasts for GDP, consumer spending and business investment which provides an economic outlook as lockdown is extended to May before a gradual reopening of parts of the sector in the UK.
IHS Markit estimated GDP will contract by -4.3% in 2020 as a result of the Coronavirus pandemic, which under the circumstances will see a -13.7% decline in ad spend expenditure.
Looking to 2021, the IPA Bellwether Report predicted that ad spend will rise gradually by +1.0%, before seeing more robust growth in 2022 onwards when the economy becomes more stable.
“From Brexit to Coronavirus, so much has changed since Q4 2019. Clearly, 2020 is going to be one of the most challenging years as marketers seek to maximise their budgets, many of which are currently restricted. With market research and event marketing budgets experiencing the largest impact in Q1, the value of efficient marketing tools and data-driven approaches to advertising will be more critical than ever. Every marketing pound is under scrutiny and expected to work harder,” commented Alexander Igelsböck, CEO at Adverity.
“The global impact is impossible to avoid, but during times of change comes the demand for increased innovation and efficiencies. While we have already seen evidence that creativity supported by data-driven insights does not have to be stifled due to reduced budgets, it is hugely encouraging to see evidence that industry sentiment for a quick recovery is strong. Understandably, the short-term outlook may provoke caution among advertisers, but looking further ahead is critical and we must all be planning for the now, the then, and the next,” added Igelsböck.