According to Bellwether data, total marketing budgets were upwardly revised by nearly one-quarter of panellists (24.1%). By contrast, 10.0% of companies recorded budget cuts, yielding a net balance of +14.1% in Q1 2022 (vs. +6.1% in Q4 2021). This was the highest since Q2 2014 and marked a fourth successive quarter in which marketing expenditure has expanded, says the IPA.
The IPA last week published the following summary of the findings:
Growth by category in Q1 2022
The top-performing segment during the first quarter was events, with a net balance of +18.7% (from -3.9%). The switch to a "living with COVID-19" strategy within the UK, alongside a further easing of pandemic restrictions during the first few months of the year, gave businesses the confidence to plan larger-scale gatherings with clients and set up exhibitions. Solid budget expansion was also seen in main media (+9.4%, from +3.1%), with other online (+18.6%), video (+9.0%) and published brands (+1.3%) driving growth in this segment. Out of home and audio continued to decline, however (-4.6% and -8.5% respectively). Elsewhere, sales promotions (+8.0%, from 0.0%) and direct marketing budgets expanded (+6.0%, from +3.8%). The final category to register growth was PR, although the expansion here was only marginal (+0.6%, from +2.0%).
The overall upturn in total marketing budgets was however slightly weighed down by market research (-3.5%, from +7.0%) and the "other" segment, which accounts for any other form of paid-for marketing not included in the survey (-0.9%, from -11.2%).
Budget plans 2022/23
The outlook among surveyed marketing executives with regards to their budgets for the 2022/23 period was strongly positive, with 43.8% of respondents anticipating growth in their available marketing spend in the coming year. This compared with 10.6% that expect cuts, resulting in a net balance of +33.1%.
All monitored marketing activities are set to receive budget expansions, led by events (+22.1%). This was closely followed by main media (+20.1%), while direct marketing and sales promotions are also set for strong growth (+14.0% and +13.6% respectively). Meanwhile, budgets for "other" marketing activity, PR and market research are also all predicted to increase (+11.1%, +10.2% and +8.6% respectively).
Business sentiment remains mixed as positive company-own projections come amid worsening industry-wide outlook
Regarding their industry as a whole, survey respondents were more pessimistic than they were three months ago, with a net balance of -3.6% of companies downbeat in the first quarter of the year. This was broadly unchanged from the fourth quarter of 2021 (net balance of -3.8%) and therefore the second-greatest degree of pessimism for over a year. The 27.4% of companies that were negative more than offset the 23.9% that were upbeat.
Company-own prospects were more positive, however, as a net balance of +6.6% of companies were optimistic in their outlook. That said, this was down from +7.6% previously and the weakest reading since Q3 2020. Close to one-third of panellists (31.5%) were upbeat with regard to their business' prospects, compared to 24.9% that were more pessimistic than three months ago.
2022 and 2023 adspend forecasts lowered as rising living costs expected to hamper economic growth
The post-COVID-19 recovery faces strengthening headwinds, namely high inflation and a squeeze on household budgets, supply chain disruptions and labour shortages. The situation is now more precarious, with Russia’s invasion of Ukraine accentuating and extending an already-damaging cost of living crisis. As a result, report author S&P’s GDP growth forecasts for 2022 and 2023 have been revised lower to 2.8% and 1.2% respectively (from 4.0% and 1.8% respectively). It anticipates this slower growth trajectory for the next 18 months or so to weigh on adspend. As a consequence, Bellwether adspend growth forecasts for 2022 and 2023 have been revised down to 3.5% and 1.8%, from 5.2% and 2.5% respectively.
Looking beyond the next couple of years, Bellwether forecasts for GDP and adspend are little-changed. There has been some uplift for 2024 growth projections (GDP and adspend growth revised up to 1.2% and 1.7% from 0.9% and 1.3% respectively) because of the weaker outlook until 2023, while 2025 and 2026 forecasts are held broadly unchanged since the last Bellwether report.
Commenting on the latest survey:
Paul Bainsfair, IPA Director General: "With Covid-19 restrictions ending, it is clear that UK companies are keen to capitalise on this moment and ramp up their marketing spend. This is welcome news now, but we know we face soaring inflation levels, cost of living increases, supply-chain issues, all exacerbated by the war in Ukraine and some sector recruitment shortages. With forty years of downturn data to learn from, the IPA knows beyond doubt that brands do best when they maintain their investment in longer-term brand-building media, complemented by a smaller ratio of sales activation media. This is the survival code for surviving a downturn."
Joe Hayes, Senior Economist at S&P Global and author of the Bellwether Report: "As the UK switches its approach from stopping COVID-19 to living with COVID-19, many businesses have begun adjusting to a post-pandemic world. We've seen strong upward revisions to marketing budgets in a clear sign that companies are gearing up for growth. Events budgets, which saw a particularly strong uplift, were a notable beneficiary of the UK government's new COVID-19 model. That said, risks to the economic outlook have built substantially so far this year. Living costs are rising, we may see inflation get close to or even hit double digits in the coming months, and this will weigh on purchasing power. Supply chain issues are still prevalent and have been exacerbated by the war in Ukraine. Rising geopolitical tensions also create uncertainty, and it may lead to companies re-assessing their decisions until all of these risks reduce."
Gill Jarvie, Client Services Director, Republic of Media and IPA Chair for Scotland: "With restrictions continuing to ease in Scotland, the last quarter has been a busy one as businesses continue to recover after the pandemic. There is a sense of optimism in the industry which is reflected in the latest Bellwether Report, showing marketing budget growth close to an eight-year high (14.1%). And whilst this optimism is cautious due to the concerns around living costs and the war in Ukraine it is important that we continue to plan for growth. Key to this will be how we continue to attract and retain talent within the industry which is currently under pressure."
Valerie Ludlow, CEO, ASG & Partners and IPA Chair for Northern Ireland: "The Northern Ireland marketing budgets continue their positive trend. However, looking forward, the outlook for the economy is particularly uncertain as to the war in Ukraine, high inflation, Covid-19, local Assembly elections, and the significant cost of living rises impacting NI households all have the potential to impact economic performance. Business and consumer confidence for Q2 will likely take its lead from the May Elections' outcomes and whether a sitting Assembly is established."
Michelle Wright, Managing Director, Gough Bailey Wright and IPA Chair for England & Wales: "The latest Bellwether Report suggests that optimism toward 2022/23 budgets as a result of the government’s strategy for living with covid, may now be threatened by rises in the cost of living and the war in Ukraine. In addition, concerns about Covid variants, a shortage of labour, and the rising costs of fuel and transport are all having a negative impact on the recovery of our international supply chains. Businesses may well adopt a cautious approach toward their marketing budgets in the coming months, however, those that are able to invest wisely are more likely to build brand strength for the longer term."
Amy Lawrence, Digital Director, MediaCom & Chair of the IPA Digital Marketing Group: "Forecasts once again are full of positive signs, with main media budgets revised up for the fourth quarter in succession, and at the highest rate in almost 5 years. For the first time in a year, 'other online' overtook 'video' as the main driver of growth, with 25.7% revising their forecasts up in these channels, although video remains strong at net 9%, and publishing brands forecasting a net growth too. Whilst the threat of omicron feels like the dim and distant past, the ongoing supply issues, the cost of living crisis and the war in Ukraine bring new uncertainty, and perhaps signal a move towards brands doubling down on more performance-led media."
Richard Aldiss, Managing Director, McCann Manchester and IPA City Head for Manchester and the North West: "Against the backdrop of the current economic landscape, I am encouraged to hear news of high levels of growth and do believe this is evidence that businesses are adjusting to life post-Covid and the swell of optimism is clearly breeding an appetite for growth. However, inflationary pressures and interest rate rises will continue to drive tightening of consumers’ purse strings in the near term – in addition to on-going concern about the wider geopolitical situation. Therefore creative work rooted in purpose and effectiveness is likely to continue to take centre stage."
Sean Feast, Director and co-owner of Gravity Global: "The positive upward trends in Public Relations reflect our own experience in B2B and complex markets, and budgets may indeed increase for the remainder of the year, though it is not a given, and I expect the scene to be 'patchy'. Confidence certainly appears to be growing. The 'steady as she goes' seems to be moving in favour of an acceleration in activity, helped in certain sectors, no doubt, by a return to face-to-face exhibitions and events, and by an economic imperative to maintain the pace of recovery."
Patrick Reid – Group CEO, Imagination: "Event budgets are on the rise at record levels as brands invest to connect in real life with their audiences, proving the importance of meaningful brand experiences. Not only did Q1 2022 kick off with the highest balance of investment since records began in 2012, but this optimism is reflected in long-term planning for the return of live events and experiences into 2022/3.
"The year won’t be without its challenges - all marketers will need to keep a close eye on current affairs and be prepared for quick decisions in case of last-minute disruptions. But we predict continued positive momentum throughout the year, building to a busy Q4 with key events such as the World Cup and the Christmas period. We're seeing a continued strong pipeline of investment from our clients and a broader take on the meaning of 'brand experience' in 2022, which is driving the need for a more diverse range of capabilities such as media planning and premium content creation for a wider set of channels."
David Fletcher, Chief Data Officer, Wavemaker UK: "After two solid quarters, Market Research has reverted to the long-term trend of a loss of share vs all marketing investment. With so much pent-up demand and delayed innovation, many marketers will naturally want to prefer to focus their budgets ‘front of house’ to maximise returns. But we know that recoveries are unevenly distributed and there are myriad reasons to believe markets will remain turbulent. Researchers who offer both the agility to help advertisers navigate choppy waters and provide real understanding of how need states evolve under cost of living constraints will be best placed to drive their own fortunes.
"There’s also a not unreasonable chance that consumers will also better engage with researchers – respondent recruitment is a challenge in good times as incentives are of only marginal benefit; inflation’s bite may be a driver of better availability."
The full report can be purchased here.
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