IPA releases latest Bellwether report

According to the latest IPA Bellwether Report, published on 18 April, 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. 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.

The IPA report the findings as follows:

Just shy of one-quarter (24.4%) of panellists recorded an upward revision to their overall marketing budgets in Q1, compared to 15% that saw a contraction. Although this led the net balance to fall to +9.4%, from +14.7% 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%, from +15.9%) as companies continued to show a strong appetite for face-to-face engagement with customers. Direct marketing (+7.0%, from +12.6%) also extended its growth sequence, albeit with the upturn cooling slightly from its previous multi-year high. Sales promotions budget growth (+4.9%, from +1.4%) gathered further momentum in the opening quarter of 2024, while expansions of a marginal nature were seen in market research (+1.4%, from -5.0%) and PR (+0.6%, from +1.9%).

Marketing budget declines were limited to just two categories in Q1, although one of which was the crucial main media segment (-0.7%, from +1.9%), 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%, from -8.1%), published brands (-5.7%, from -1.4%) and audio (-4.5%, from -7.0%). This slightly offset growth in other online (+7.1%, from +13.2%) and video (+0.8%, from +6.6%). Other marketing activity not already accounted for also saw budgets shrink in the first quarter (-4.3%, from -6.4%).

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%) of the survey panel have lifted the total amount available for marketing, compared to 18% reporting cuts. The resulting net balance of +22.8% 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% 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%. Main media advertising is also poised for budget expansion in 2024/25, with a net balance of +10.1% planning to lift available expenditure in this segment. PR (+6.3%) and sales promotions (+6.0%) 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%) and the other category (-3.4%) 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%) 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% of firms expressing stronger negativity, yielding a net balance of -5.4% (up from -12.7%). Nevertheless, this was the highest seen for two years.

Regarding their own companies, Bellwether firms remained optimistic in the opening quarter. At +9.7%, the net balance of companies that were more upbeat towards financial prospects was strong (albeit slightly weaker than +12.6% previously). While nearly one-fifth (19.5%) were downbeat, 29.2% 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%), rather than a small contraction (-0.1% 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% for 2024 (vs. -0.7% 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% for 2025 and 1.9% in both 2026 and 2027.

Commenting on the latest survey:

Paul Bainsfair, director general, IPA: "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: "Greenshoots 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."

Patrick Reid, group CEO, Imagination: "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% - 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% 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 & Global, EssenceMediacom & chair of the IPA Digital Marketing Group: "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: "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%) and largely driven by a reduction in Out of Home spend. However, the 2024/25 outlook for media spend is still positive (+10.1%) 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: "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: "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: "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: "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."

The full report is available to purchase from the IPA.