Bellwether shows downturn biting into budgets

The sharpest cut to marketing budgets was seen in the "all other" category, which includes activities such as event sponsorship, PR and market research.

The "all other" category has undergone the steepest drop for two years, while direct marketing has had the largest fall in eight years and sales promotion the biggest decline for two years.

Main media budgets were unchanged in the first quarter and are set to see the fastest growth in 2008, the report said.

However, the category includes internet spend, which maintained its star performer status, suggesting that traditional media such as print, TV, outdoor, cinema and radio were revised down.

Within the internet, spend on search rose at a slightly faster rate than total spend. During the first quarter, 29% of companies revised budgets up and 6% revised them down.

Although total marketing expenditure is still set to rise in 2008, the rate of growth is predicted to be well below the buoyant growth signalled by initial budget setting at the start of this year, and considerably below levels seen at the start of last year.

Moray MacLennan, the IPA president and chairman of M&C Saatchi, Europe, said: "We should not be surprised perhaps, that budgets are being revised downwards in the current climate. It is however, a good moment to remind advertisers that those that maintain the strongest marketing spend will come out on top."

In the first three months of this year, 19% of companies reported increased total marketing budgets, while 21% reported a decrease, giving a net balance of -2.1%.

Only 9% of companies reported an increase to budgets for "all other" marketing, while 16% reported a decline, with a net balance of -7.8%. One in five companies reported a downward revision to direct marketing budgets, while just 13% signalled upward revisions.

Having slowed to the weakest since mid-2003 in the fourth quarter, growth of internet marketing budgets recovered in th first quarter, with 27% of companies having revised up their budgets against 5% revising them down.

The biggest cuts to marketing budgets were seen in the FMCG, public, industrial and utilities, and media sectors.

Robert Lerwill, chief executive of Aegis, said: "Let's not lose sight of the fact that, as today's report points out, marketing spend is still set to increase in 2008, with budgets ahead of 2007 levels.

"The Bellwether also shows that media spend, led by the internet, will likely see the strongest acceleration in the year. Both those facts are fully consistent with what we see in our own business -- in the UK and elsewhere. But for all that, we should not be complacent."