The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance of +12.9% of companies registering an increase to their budgets during Q4 2016, down only fractionally from Q3’s nine-quarter high of +13.4%. (*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.)
Looking ahead to 2017/18 budget plans, UK marketers have indicated a positive outlook, with a net balance of +27.6% of companies signalling growth in their total budgets for the coming year.
Despite positive revisions to budgets, the uncertain economic and political climate continued to weigh on industry financial prospects during the final quarter of 2016. A net balance of -14.6% of companies signalled a deterioration in their confidence regarding industry financial prospects over the past three months. This was down on Q3’s -12.1% and the lowest level recorded for four years.
In contrast, panellists retained a reasonable degree of confidence regarding their own company prospects, with the respective net balance edging up slightly in the fourth quarter to +11.2%, from +10.6% in Q3.
Adspend forecast growth
Following a strong rise in economic activity at the end of 2016, which has resulted in an unexpectedly firm 2.1% increase in GDP, Bellwether is now anticipating adspend to rise by 2.1% in 2016, up from Q3’s estimate of 1.9%; and by 0.7% for 2018, up from Q3’s estimate of 0.2%.
However, punctuating this growth, Bellwether has forecasted a fall during 2017. Uncertainty over the impact of the negotiations of the UK’s terms of EU withdrawal is likely to drag on investment, while consumer spending is forecast to rise at a much slower rate. The result is a projected -0.7% annual fall in adspend during 2017, unchanged from Q3’s estimate.
Once again, events recorded the strongest upward revision to budgets of all the Bellwether categories, with a net balance of +12.3%, up from +9.9% in Q3. Internet also continued to gain an increasing share in the marketing mix of companies, recording a net balance of +12.1% for Q4 2016. That compared to Q3’s +9.5% and was the best reading for two years. Within internet, mobile advertising increased, recording a net balance of +3.9% compared to -2.6% in the preceding quarter; while internet search/SEO recorded a net balance of +7.1%, down slightly on Q3’s 7.3%.
Most notably main media advertising staged a recovery in Q4. The respective net balance rose to +5.1% from -3.8% in Q3. Other categories that registered an increase in spending included ‘other’ (+3.6%) and PR (+2.8%).
In contrast, sales promotions (-1.8%) and market research (-2.5%) both recorded declines, while budgets related to direct marketing (0.0%) were unmoved since the previous quarter.
Says Paul Bainsfair, Director General, IPA: “After a year of well-publicised doom and gloom, Bellwether provides some welcome positive news. With marketers revising their budgets up yet again, the industry ends the year on a high. Furthermore, it is reassuring that despite the slight fall in adspend predicted by Bellwether in 2017 due to Brexit negotiations, growth is forecast for both 2016 and 2018.”
Says Paul Smith, Senior Economist at IHS Markit and author of the Bellwether Report: “The Q4 2016 Bellwether survey provides a fascinating account of the impact on marketing activity of a currently humming UK economy contrasting with the uncertain Brexit-dominated prospects to be faced in the coming months.
With company sales growth being underpinned by firm UK household spending, marketing budgets continued to be driven higher in the fourth quarter of 2016 and a number of companies are seeking to maintain growth with some taking advantage of the weak pound to promote their goods and services to a foreign audience.
However, with inflation set to rise in the coming months and erode purchasing power, plus the continued uncertainty created by the Brexit vote, it remains to be seen whether momentum can be sustained into the heart of 2017.”
Further industry comment can be read here.
Notes to editors:
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 18 January 2017 edition is available to purchase from the IPA website 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 firstname.lastname@example.org.
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Last updated 18/01/2017