Data: UK companies continue to up marketing spend
April 18, 2024
UK companies revised their marketing spend up once again in Q1 2024, stretching a run of growth that dates back to the second quarter of 2021, according to the latest IPA Bellwether Report. A sustained upturn in marketing spend comes amid an improving economic backdrop for the UK economy, with an impending emergence from recession and falling inflationary pressures.
Just shy of one-quarter (24.4 per cent) of panellists recorded an upward revision to their overall marketing budgets in Q1, compared to 15 per cent that saw a contraction. Although this led the net balance to fall to +9.4 per cent, from +14.7 per cent in Q4 2023, it was nevertheless the second highest in almost two years and pointed to a solid quarterly expansion.
Growth by category in Q1 2024
Events was the stand-out Bellwether category, recording a series-record expansion (net balance at +23.1 per cent, from +15.9 per cent) as companies continued to show a strong appetite for face-to-face engagement with customers. Direct marketing (+7 per cent, from +12.6 per cent) also extended its growth sequence, albeit with the upturn cooling slightly from its previous multi-year high. Sales promotions budget growth (+4.9 per cent, from +1.4 per cent) gathered further momentum in the opening quarter of 2024, while expansions of a marginal nature were seen in market research (+1.4 per cent, from -5.0 per cent) and PR (+0.6 per cent, from +1.9 per cent).
Marketing budget declines were limited to just two categories in Q1, although one of which was the crucial main media segment (-0.7 per cent, from +1.9 per cent), signalling some caution towards big-ticket advertising campaigns. According to more granular data on main media, the contraction was driven by out of home (-10.8 per cent, from -8.1 per cent), published brands (-5.7 per cent, from -1.4 per cent) and audio (-4.5 per cent, from -7 per cent). This slightly offset growth in other online (+7.1 per cent, from +13.2 per cent) and video (+0.8 per cent, from +6.6 per cent). Other marketing activity not already accounted for also saw budgets shrink in the first quarter (-4.3 per cent, from -6.4 per cent).
Budget Plans 2024/25
Finalised budget setting plans for the 2024/25 financial year were strongly positive, in line with preliminary estimates, latest Bellwether survey data showed. Just over four-tenths (40.7 per cent) of the survey panel have lifted the total amount available for marketing, compared to 18 per cent reporting cuts. The resulting net balance of +22.8 per cent signalled strong budget setting for 2024/25.
The main area of marketing budget growth for 2024/25 is set to be events, with a robust net balance of +18.7 per cent of survey respondents anticipating an uplift in spend compared to the previous financial year. This strongly outperformed the next-best category, direct marketing, which boasted a respectable positive net balance of +11.9 per cent. Main media advertising is also poised for budget expansion in 2024/25, with a net balance of +10.1 per cent planning to lift available expenditure in this segment. PR (+6.3 per cent) and sales promotions (+6.0 per cent) were the last two monitored marketing categories in positive territory for 2024/25.
That said, companies were still wary of cost-savings where possible, with spending in some areas of marketing expected to be withdrawn as a result. Market research (net balance of -4.4 per cent) and the other category (-3.4 per cent) are set to contract.
Businesses remain optimistic towards their own companies’ prospects
The latest Bellwether data indicated a much-reduced level of pessimism towards industry-wide financial prospects, reflecting strengthening business conditions across the UK economy more broadly. In Q1, just shy of one-fifth (19.5 per cent) of survey respondents were more optimistic towards their industry’s outlook than they were in the previous quarter. This was only narrowly cancelled out by 24.9 per cent of firms expressing stronger negativity, yielding a net balance of -5.4 per cent (up from -12.7 per cent). Nevertheless, this was the highest seen for two years.
Regarding their own companies, Bellwether firms remained optimistic in the opening quarter. At +9.7 per cent, the net balance of companies that were more upbeat towards financial prospects was strong (albeit slightly weaker than +12.6 per cent previously). While nearly one-fifth (19.5 per cent) were downbeat, 29.2 per cent were positive with their near-term company-own assessment.
Adspend to bounce back in 2025
Since the last Bellwether Report, a slew of positive and improving business survey data indicate that the UK recession will be short-lived, with growth expected to be confirmed by first quarter GDP data. S&P Global Market Intelligence have subsequently revised their forecast for UK GDP in 2024, expecting growth (0.2 per cent), rather than a small contraction (-0.1 per cent previously estimated).
Still, with interest rate cuts not expected until June at the earliest, and consumer confidence surveys remaining weak, there are obvious challenges at large for the UK economy which could weigh on businesses’ propensity to spend, with margin compression coming in the form of still-elevated costs, strong wage pressures and supply-chain issues. As such, the Bellwether forecast for adspend to decline in real terms remains little-changed at -0.5 per cent for 2024 (vs. -0.7 per cent previously).
However, from 2025 onwards, tailwinds from lower inflation and borrowing costs should support household real incomes, driving the UK economy and adspend into more robust expansion territory. Bellwether adspend growth forecasts improve to 1.2 per cent for 2025 and 1.9 per cent in both 2026 and 2027.
Commenting on the latest survey, Paul Bainsfair, IPA director general said, “Spring is in the air, bringing with it a greater sense of optimism in the UK economy and in UK companies’ marketing spend intentions for the year ahead.”Ahead of a suspected lightening-up on some economic pressures closer to home in the coming months, and despite wider geo-political uncertainties, UK companies are once again recognising the value of advertising by revising their spend up this quarter. One note of caution, however, is that we seeing companies revert to upping their promotional spend while revising their main media spend down – a trend that had been bucked over the past couple of quarters. While sales promotions can stimulate short-term sales increases, the evidence also shows that their over-use can undermine a brand’s profit margins and pricing power over time by habituating consumers to buy mainly on price. As always, a careful balance needs to be struck to ensure longer-term growth, for which greater investment in brand advertising particularly in main media, pays dividends.”
Joe Hayes, principal economist at S&P Global Market Intelligence and author of the Bellwether Report said, “Green shoots of recovery are appearing across the UK economy. With business survey data suggesting UK GDP will expand in the first quarter, it’s no surprise to see another strong round of marketing budget growth. Cost-of-living pressures and high borrowing costs has led household and businesses to retrench in recent times, making the market more competitive to earn and retain customer business. Throughout this period, we’ve seen marketing perform strongly, so it’s very encouraging to see that firms are staying true to the course that has clearly yielded positive results.”
Industry comment on the Q1 2024 IPA Bellwether Report
Patrick Reid, group CEO, Imagination, said: “The latest IPA Bellwether Report highlights the UK’s resilient marketing landscape, with events and experiences remaining the standout performers. In the last quarter, events saw a record expansion, with a net balance of +23.1 per cent – the highest in the survey’s 11-year history. This resilience demonstrates businesses’ strong desire to connect with customers, as well as marketers’ recognising the power of experiences to enable them to achieve this. As the UK economy recovers from recession, businesses recognise the importance of experiences as a tool to drive their bottom line. Looking ahead, the outlook for events remains positive, with promising continued growth. The report indicates that a net balance of +18.7 per cent of companies plan to increase their event budgets in 2024/25, suggesting that events are set for even more robust growth in the coming years, which rings true to the activity we’re seeing across our client portfolio. Long-term brand building should remain at the forefront amid rising promotional spending. Aligning brand experiences across the different touchpoints with core values and harnessing authentic content created from experiences fosters trust and engagement and is crucial for navigating the dynamic marketing environment.”
Amy Lawrence, digital partner, UK and global, EssenceMediacom and chair of the IPA Digital Marketing Group, said: “It is heartening to see that the positive signs of recovery in the UK economy are reflected in positivity around marketing budgets, particularly in direct marketing and sales promotions. Whilst there is caution in main media advertising with a slight contraction, this lean towards promotions is echoed by the continued growth in online media, which is an indicator of a move towards more performance focus. As always advertisers should be cautious of moving away from brand spend and the long-term impacts that that can have.”
Gill Jarvie, client services director, Republic of Media and IPA Chair for Scotland, said: “There does seem to be a more optimistic outlook within the Scottish marketing industry, so it was good to see this reflected in the latest Bellwether report. The biggest surprise was that Main Media spend was one of the few sectors seeing a reduction in Q1 (-0.7 per cent) and largely driven by a reduction in Out of Home spend. However, the 2024/25 outlook for media spend is still positive (+10.1 per cent) so this is hopefully just a small setback and not a sign that we are returning to short-term sales tactics rather than investing in longer-term brand building.”
Helen Blakley, managing director, Genesis and IPA chair for Northern Ireland, said: “It is great to see the second strongest upturn in marketing budget reported since Q2 2022, signalising the continued optimism as we move forward into 2024. This optimism is also reflected locally in Northern Ireland, with a recent Ulster Bank survey suggesting that NI firms are their most optimistic about their future output in nearly six years with all sectors expecting output to be higher in a year’s time. As the year continues, it will be interesting to see if this optimism fully translates to sustained and solid marketing budgets for 2024/25. Since the last IPA Bellwether Report, I’m pleased to see the NI Executive up and running. As the new Ministers get to grips with their Departments and new financial year budgetary position, we are yet to see how this will fully play out for the crucial marketing communications which support the key priorities. The reported continued growth for events demonstrates brands are valuing that customer face-to-face interaction and expanding their footprint beyond the main media advertising. Unsurprisingly online continues to take budget share which is reflected locally here. It will be interesting to see how the sport filled summer of appointment-to-view opportunities will affect activity as 2024 continues.”
Richard Aldiss, IPA chair for England & Wales, said: “With the arrival of spring comes a natural surge of optimism and energy. And despite lingering caution, the Q1 2024 IPA Bellwether Report brings encouraging news of sustained growth in total marketing budgets. We are seeing brands actively refining their channel strategies, investing in more data-driven, personalised direct communications and experiences. However, success in maintaining customer loyalty, driving growth, and staying competitive hinges on investment strategies that comprehensively address the entire customer experience.”
Alex Uprichard, managing director, IMA-HOME and IPA City head for Leeds, Yorkshire and Humberside, said: “The latest IPA Bellwether Report is welcome evidence that optimism about the year ahead is well placed. Continued growth in marketing budgets and more positive economic indicators suggests our industry is in a healthy position and consumer pressures are easing a little. The shape of budgets continues to buck trends this quarter, with traditional advertising budgets revising down again and events continuing to fly with the fastest growth rate on record. We’re out of the post pandemic hangover and consumers are actively engaging with and benefiting from brand led experiences in real life.”
Sue Benson, managing director, The Behaviours Agency and IPA City head for Manchester & North West, said: “Spring has definitely brought with it some green shoots of recovery, and whilst we’re far from out of the woods yet (Q1 cooling noted) there does appear to be optimism for marketing budgets for the rest of the year. What I find most fascinating is the growth in Events and DM budgets. My view is that consumer behaviour is still being impacted by the covid legacy and interaction with both humans and physical things is a much sought after experience and importantly driving the response metrics brands are looking for.”
Commenting on the report, Matt White, VP EMEA at Quantcast, said: “Q4 is traditionally the busiest time of year for consumer spending, with Black Friday closely followed by Christmas, so it’s quite surprising that ad spend increased in Q1 2024. While many will say the captive audience the holiday season brings has diminished, marketing teams have clearly been looking ahead to a year filled with key advertising moments, wanting to plan early rather than compete last minute. The summer brings with it Euro 2024, closely followed by the Paris Olympics, both of which are happening in time zones that are conducive to strong consumer engagement in the UK. The continued growth of CTV will no doubt have played a role in increased ad spend as well, with the latest figures highlighting a strong uptake of Netflix’s advertising tier – 1.45 million homes in the UK, and 23 million active users globally. As this grows, so will the volume of brands investing in the platform.
“Q1 also saw Google begin its deprecation of third party cookies on Chrome. Whether marketers have started investing in cookieless advertising or are waiting for more clarity, spend will increase throughout the year. The rest of 2024 will see more brands begin taking advantage of finally being able to reach 100 per cent of the open internet, rather than accepting the diminishing returns of outdated targeting approaches,” concluded White.