While UK marketing budgets continued to endure cuts as Covid-19 dragged on into the first three months of 2021, the decline slowed to its softest rate since the pandemic began. Indeed, in categories like video marketers are beginning to see the other side.

According to the quarterly IPA Bellwether report, a net balance of -11.5% of marketing executives reported a contraction in their budgets during the first quarter. Although still “historically marked”, the decline has eased substantially from the -24% recorded during the final quarter of 2020.

At the same time spend on video, which includes TV, cinema and online video, has returned to growth, as the net balance of those who increased spend rose from -3.5% to 3.3%.

Video falls under the IPA’s ‘main media’ category, which reported a net balance of -8.2% cut in spend. This is a notable improvement on the -21.8% it recorded in the fourth quarter. The decline in this category was largely driven by continued cuts in outdoor advertising (-24.1%), published brands (-22.2%) and audio (-9%). ‘Other online’ stabilised over the quarter, recording a net balance of 0.0%.

The trajectory is very much moving in a positive direction and at a good pace.

Paul Bainsfair, IPA

Of the other seven monitored marketing categories, the sharpest decline in budgets was once again witnessed in events, at -43.2%.

Spend on sales promotions was down -16.2%, ‘other’ marketing was cut -14.7% and market research continued on its long-term path of decline at -17.8%. The least hit category was PR, with a net balance of -8%.

However, the report has found marketing executives feeling optimistic about the industry’s financial prospects, which is the first time they have done so since the end of 2015.

The net balance of firms that felt more confident than three months ago was 26.2%, a dramatic rise from -5.8% in the fourth quarter of 2020. Overall, 41.2% of firms were more optimistic compared to three months ago, while only 15% were less so.

Marketers also expressed the strongest level of optimism about the financial prospects of their own companies for six years, with a net balance of 36.6% of firms feeling upbeat about the future. Almost four times as many companies reported improved sentiment compared to those recording a deterioration (49.5% versus 12.9%).

“Despite remaining in negative territory overall, the vital signs from this quarter’s Bellwether Report are looking ‘V’ encouraging for a bounce back in UK marketing investment,” says IPA director general, Paul Bainsfair.

“With companies’ confidence levels regarding their financial prospects soaring and with almost three quarters of UK companies either revising their marketing budgets upwards or keeping them the same this quarter versus last, the trajectory is very much moving in a positive direction and at a good pace.”

Signs of recovery

The Bellwether Report anticipates budgets could recover in the next financial year and with lockdown measures being eased across the country, this prediction is looking increasingly likely.

A net balance of 17.4% of firms expect their marketing budgets to increase over the next 12 months, the strongest growth in expectations since 2018. The latest figure has been upwardly revised from a preliminary estimate of 12% in the previous report.

Marketers appear most keen to reinvest in main media advertising, which is typically used for brand building. A net balance of 10.1% of firms anticipate higher expenditure in the category next year, suggesting that after 12 months of cuts marketers are ready to get their brands back front and centre in consumers’ minds.

Marketing executives also predict a rise in budgets related to public relations (net balance of 7.4%) and direct marketing (6.8%), while expectations regarding sales promotions were neutral (0.0%).

However, events (-28.4%), ‘other’ marketing (-5.4%)  and market research (-4.9%) can expect continued budget cuts.

Market research spend slumps as shift to digital and Covid hit

Economist at IHS Markit and author of the Bellwether Report, Eliot Kerr, believes that although marketing budgets continued to decline at a marked pace amid ongoing Covid-19 restrictions, it is positive to see a further trend towards stabilisation.

“Meanwhile, upbeat forecasts from UK marketers for the coming financial year, after the marked reduction in budgets through 2020, bolsters expectations for a post-pandemic recovery and bodes well for the UK economy,” adds Kerr.

“Without a doubt, the improvement in budget plans from the previous survey period will have been supported by the release of the UK government’s roadmap to relaxing restrictions. It has allowed businesses to look beyond the current climate and begin to build towards a time when demand will recover. If all goes to plan, a strong economic recovery should see adspending rise sharply in the second half of the year.”