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Marketing budgets in the UK remain in decline

Posted on 14th July 2011 in Industry News, Insight
Written by: Fiona Rickard

A study by the IPA (the advertising trade body) and BDO (the accountancy network) has found that marketing budgets remain in decline in the UK.  The survey included 300 of the country’s top 1,000 companies and the main reason given for the trend is uncertainty about the economy.  22% reined in their outlay during the second quarter of this year, measured against 20% boosting spending levels, resulting in a net balance of -2.2%.  This constituted an improvement on the -5.1% logged in Q1, but still represented the third successive negative quarter.
One of the primary reasons encouraging such a strategy from April to June was a desire to sure up profit margins given on-going financial uncertainty.

Sales promotion has seen the biggest decline at  -7.4% suggesting this recession-led tactic is losing its appeal.  The internet maintained a cycle of growth that has lasted over two years, its 1.9% improvement in Q2 – incorporating a 4.6% lift for paid search – was the smallest gain recorded in this timeframe.  Direct marketing expenditure also saw a net balance of 2.5%.

At the start of the year, 2011 budgets had originally been set higher (compared to 2010 actual spend on average) to the greatest extent in three years, but it is looking increasingly likely that companies will trim their budgets in the second half of the year.  31% of participants had become more upbeat, and 28% displayed lower levels of confidence than previously and 33% of contributors agreed the prospects for their industry as a whole had softened against Q1, and 22% provided a more positive appraisal.  This decline in confidence is not surprising amidst a continuing climate of concern surrounding the financial and political outlook both at home and internationally.  However some companies are maintaining their levels of spend through the recession ready to meet the upturn when it happens.  Fundamentally what this picture means for all marketers is that the budget companies do spend on communications must be deployed judiciously and in an integrated way using all the right tools in the box (PR, Advertising, Direct Marketing, Digital, Sales Promotion) to ensure that the sum of the parts is greater than the whole.

Data sourced from IPA/Warc 14 July 2011 with comment from Fiona Rickard