Marketing budgets slump again as UK enters second Covid wave

UK companies have continued to cut marketing budgets throughout the third quarter of the year, as Covid-19 restrictions and a second wave of the virus cast a shadow over business.

The latest IPA Bellwether report shows a net balance of companies cutting their marketing budget fell to -41.%. This is a slight improvement on the record lows seen during the second quarter (-50.7%), when the majority of businesses were either temporarily closed or at reduced capacity under lockdown. However, worryingly this is still the second-quickest decline since the Bellwether survey began in 2000.

In fact, just 11.6% of respondents saw an increase in budgets during the three-month timespan, compared with the 52.6% who registered a decrease.

Budget cuts were reported in each of the seven monitored marketing categories. Overall, just 3.8% of panellists were able to report an increase in available spend, compared to 67.9% citing a decline.

Event spending was hardest hit, registering a net balance of -64.1%, which is up from a net balance of -76.6% in the previous quarter. Direct marketing and ‘main media advertising’ both fared better, although a net balance of -25.3% of businesses reporting a drop in both categories still makes for gloomy reading.

In ‘other online’ campaigns, part of the main media advertising sector, there were signs of life, with budgets reportedly down by a net balance of just -6.5%, compared with a net balance of -35.1% in the second quarter.

“The broad-based decline across all types of marketing budgets highlights the negative impact that the public health crisis is continuing to have on business conditions,” explains IHS Markit economist Eliot Kerr, one of the authors of the Bellwether Report. He explains uncertainty over a no-deal Brexit is having an impact on an already jittery Covid-dominated mix.

Assuming restrictions remain at their current level of stringency, the expectation is a -13.2% reduction in consumer spending and a -20% decline in business investment during 2020, figures which correspond to Bellwether’s forecast of a -23.3% fall in adspend for the year as a whole.

However, if a robust recovery can be acheived during 2021, the report authors forecast of a 11.3% rise in adspend during 2021, followed by a steady trend towards long-term growth rates.

“Looking forward, if the UK can avoid another large-scale coronavirus outbreak and achieve a smooth exit from the European Union, we should see an improvement in economic conditions as firms learn how to better operate in this new business environment,” Kerr adds.

IPA director general Paul Bainsfair admits there were hopes for a “slightly sharper rebound” from the horrors of the second quarter and with the second wave of coronavirus upon us, and Brexit negotiations ongoing, any green shoots of recovery in the immediate term are “increasingly unrealistic”.

He does, however, stress that companies need to think seriously about upping their marketing presence, resisting the temptation to go dark and sit out the remainder of the year.

“The evidence proves that those who can invest in marketing during the downturn will reap rewards in both the short and longer term,” Bainsfair says.

“They will increase their brand recognition, strengthen their brand positioning and get ahead of the competition. In fact, because many advertisers do not heed this advice, just maintaining spend at normal levels leads to a greater share of voice and in turn greater brand share.”