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Bellwether shows cuts slowing as companies adopt positive outlook

LONDON - Companies are still cutting their marketing budgets after two years, but the rate of decline has slowed and executives' confidence in their financial prospects has turned very positive, according to the third quarter IPA Bellwether Report.

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The survey showed that online marketing budgets have returned to growth, though all other budget categories are still on a downward trend.

The overall reading for the proportion of companies revising their third quarter marketing budgets up or down was -15%, an improvement on the last quarter's -28% and the record low of -42% in the fourth quarter of 2008.

It is the eighth consecutive quarter of downward revisions, suggesting that spend will fall in 2009, for the second year running.

However, marketing executives indicated the strongest degree of optimism about their financial prospects since the end of 2006, with 47% reporting improved prospects and 17% reporting worsened prospects, giving a net balance of 30%.

This statistic drew a cautious response from the author of the report, Chris Williamson, chief economist at Markit.

"On the one hand, the Q3 survey provides further welcome evidence to show that the UK has bounced out of recession, with companies' views on their financial prospects surging to a near three-year high.

"On the other hand, the fact that marketing spend continued to fall despite this rebound in confidence will add to doubts about the ability of the recovery to become self-sustaining as businesses appear to remain in cost-cutting mode."

Bearing the brunt of the cost-cutting was the 'all other' category, revised down by 24.4% of companies, and main media advertising, down 10.4%.

Internet was up 4.5% and internet search up 5.4%, with sales promotion down 4.5% and direct marketing down 4.7%.

Rory Sutherland, IPA president and vice-chairman of Ogilvy Group UK, said: "It will be interesting to see whether the rise in internet spend will presage an upturn in other categories."

The rise in internet spend came after only three quarters of reductions for the category.

The divergence across categories was picked up by Jim Houghton, head of marketing services at accountants BDO, who said: "It will come as a great relief to the industry that the economic pressures seem to be easing. Evidently this relief won't be uniform, with online and sales focused marketing disciplines the strongest.

"After two years of dramatic decline, the industry also needs to reflect on what recovery will mean when it finally does arrive."

Latest brekadown of budget revisions (Source: Bellwether)

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