UK marketing budgets have been largely frozen during Q3 2024, according the the latest IPA Bellwether Report, as marketers cautiously await the Government’s autumn budget on 30th October. There was good news for the main media category however, with advertisers increasing their budgets for big-ticket video campaigns.
The report paints a chilly picture for UK marketing activity in the latest quarter. A net balance of 0 percent of marketers increased their ad budgets, down from +15.9 percent during Q2 2024. Budgets being “put on ice” brings an end to 13 consecutive quarters of sustained budget increases, at an average net balance of +8.8 percent.
Audio falls while video climbs
The report identified categories hardest hit by budget revisions, led by the out-of-home (OOH) segment, which saw its steepest decline (15.7 percent) since Q2 2022. Audio also fell to -10.0 percent, from -5.5 percent in the previous quarter, alongside declines for published brands advertising (-4.4 percent) and other online marketing budgets (-1.4 percent).
But there were brighter signs for main media budgets, which saw a net balance of +4.3 percent, the category’s strongest growth so far this year. This increase was driven by big-ticket video campaigns, which registered their strongest growth since Q4 2022, at +11.7 percent. Meanwhile public relations saw the highest upward revision at 11.0 percent, followed by events (+9.9 percent) and direct marking (+9.7 percent).
“Negative hype surrounding the impending Budget has no doubt created choppy waters for UK companies and their marketers to navigate,” said Paul Bainsfair, IPA Director General. “Looking to the positives, this quarter’s results reveal that companies aren’t cutting their marketing budgets; they are pressing pause until they know more about the Government’s economic plans. As clarity emerges, this may indeed prove to be a temporary dip in overall marketing spend rather than the start of a long-term downward trend.”
Short-term pain but long-term gains
The IPA additionally gauges sentiment for industry-wide and company-specific prospects, and Q3 saw the outlook turn negative after two years of optimism. Pessimism was relatively slight (-2.2 percent) for the financial prospects of individual companies, but more pronounced (-16.2 percent) for the wider industry, reaching its lowest ebb since Q4 2022.
But looking ahead to the rest of the year and into 2025, there are positive signs on the horizon. S&P Global Market Intelligence has upwardly revised its UK GDP growth forecast for 2024 to 1.2 percent, up from 0.6 percent in the last Bellwether report. And growth in 2025 is expected to be similar, according to S&P, forecasting 1.3 percent annual GDP expansion. As a result, ad spend is expected to grow by 0.6 percent in real terms for 2024, and 1.3 percent next year. Ad spend is then projected to rise at rates close to 2 percent in 2027 and beyond.
“It is worth noting that our ad spend forecast has been revised up for 2024 and 2025 because the economic data has been so strong so far this year, and that main media growth strengthened to a one-year high while sales promotion budget growth slowed – both of which are signals of bullishness,” added Paul Bainsfair.
“It is also worth remembering, as the expression goes, a smooth sea never made a skilled sailor,” he continued. “It is in the tough times that we know that our highly skilled, experienced agencies and their trusting, brave clients can reap significant market share for brands by continuing to invest in advertising. By raising their advertising voice when others go quiet – particularly in longer-term brand-building media, brands can achieve greater market stand-out, and in doing so strengthen their value and embolden their price elasticity.”