The reduction in Q3, which indicated a heightened caution amongst companies regarding the slowdown in some UK economic sectors and an easing in confidence surrounding the wider global outlook, was predicted by the Bellwether Report back in Q4 2014.
The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance* of +4.4% of companies registering an increase in budgets during Q3 2015. This is down significantly from the +12.2% reading in Q2 2015 and is the lowest recorded since Q1 2013. (*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upwards revision.)
Alongside easing revisions to marketing budgets, optimism regarding marketers’ wider industry financial prospects continued to wane. A net balance of +6.8% of companies indicated they felt less optimistic about the financial prospects of the various industries they are operating within. This is down from +13.1% in Q2 2015 and marks a nine-year low. Marketers’ confidence regarding their own financial prospects also eased, with a net balance of +22.4%, compared to +25.3% in Q2 2015, marking a two-and-a-half-year low.
With the Bellwether survey highlighting a slowdown in marketing budget growth in the third quarter of the year, plus evidence of a wider macroeconomic slowdown, projections for UK adspend growth this year have been downgraded. The latest forecast is for a real-term increase of +3.7% in 2015, a revision from +4.2% in the previous survey, with growth set to ease a little further in 2016 to +3.6%.
Growth was reduced in the majority of Bellwether categories in Q3 2015. Internet was the best performing category at +7.8%, up from +6.8% in Q2 2015. Within Internet, spending related to search/SEO also continued to increase in Q3, up marginally to +0.6%, albeit significantly lower than the +6.5% reading in Q2 2015. Events also registered marginal growth in revisions to marketing budgets at +2.6% and main media at +0.5%. Declines in marketing budgets were seen elsewhere. PR (-5.8%) and market research (-4.7%) recorded the greatest falls, followed by sales promotion (-3.4%), direct marketing (-2.7%) and ‘other’ (-1.1%).
Commenting on the latest survey:
Paul Bainsfair, IPA Director General:
“As predicted by Bellwether, upward revisions to marketing budgets and confidence are easing. However the important point is they are still positive. More specifically, there are upwards revisions to internet, events and main media advertising budgets in Q3. We are seeing marketers demanding greater accountability, physical presence and share of mind in their planned marketing spend.”
Paul Smith, Senior Economist at Markit and author of the Bellwether Report:
“While the deterioration in the headline index to a 10-quarter low looks dramatic, the slowdown in growth was somewhat on the cards.
“As noted in the previous survey, confidence in the financial and economic outlook was already on the wane. Since then, UK growth has softened, while concerns over the outlook in emerging markets and the wider global economy have increased.
“Moreover, casting the latest data against a record run of expansion in marketing budgets, a period that includes the strongest upward revisions on record, the correction in growth seemed likely.
“Focus is therefore probably better placed on the continued expansion in budgets and the welcome news that marketing executives are continuing to adapt a prudent, targeted approach to marketing strategies.”
Tom Lewis, Finance Director, IPA:
“Yes, confidence continues upwards, but so does the slow-down in the rate of increase.
The mixed outlook – from corporate scandals and geo-political uncertainty to a potential Brexit - mean that agencies need more than ever to ensure they have the right staff, services, processes and management information.”
Read further industry comment here.
The Bellwether Report is researched and published by Markit Economics on behalf of the IPA. First published on the 17th July 2000, it features original data drawn from a panel of around 300 UK marketing professionals and provides a key indicator of the health of the economy. The 8-page 15th October 2015 edition is available to purchase here for £99+VAT (IPA members) and £140+VAT (non-members) as an immediately downloadable PDF. To sign up for an annual subscription, or to request historical data, contact email@example.com.
Last updated 15/10/2015