The latest IPA Bellwether Report shows that revisions to total marketing budgets were put on ice during the third quarter of 2024, indicating that uncertainty regarding the imminent Autumn Budget is prompting a more cautious approach from UK companies.
The Q3 findings reveal that the respective net balance of UK companies revising their marketing budgets up (21.6%) vs revising them down (21.6%) has dropped from +15.9% in Q2 to 0.0%. This demonstrates a significant shift in behaviour from the robust growth observed over the previous 13 quarters, which had averaged an impressive net balance of +8.8%.
Growth or decline by category in Q3 2024
Despite this renewed apprehensive approach to marketing budgets, the category breakdown revealed several strong-performing media categories in the third quarter. Notably, public relations saw the most significant upward revision, with the net balance soaring to a record high +11.0%, from +2.6% in the previous quarter. Ranking second was events with a net balance of +9.9% (vs. +17.2% previously) as demand for in-person and face-to-face interactions with customers and prospects remained strong. Direct marking followed closely behind, with the net balance printing the strongest reading in three quarters at +9.7% (+8.9 in Q2), signalling a continuation of this segment’s impressive growth streak.
Main media advertising, one of the most potent tools available to UK marketers, experienced a second consecutive quarter of budget increases, with the net balance climbing from +3.5% to +4.3%, indicating the strongest growth in a year. The breakdown by sub-category showed that this growth was driven by big-ticket video campaigns, which saw the net balance of firms registering upward revisions rise to +11.7% from +7.8%, its highest since Q4 2022. This surge masked declines in the remaining segments. Following stabilisation in the previous quarter, out of home experienced the most significant downward revisions to marketing expenditures in the third quarter. The net balance fell back into contraction territory, with a reading of -15.7%, marking the steepest decline since Q2 2022. Audio weighed down main media marketing, with the net balance dropping to -10.0% from -5.5%. Published brands advertising (net balance of -4.4%, from -6.3%) and other online marketing budgets (net balance of -1.4%, from +15.3%) also saw contractions, the latter recording its first negative net balance in four years.
Sales promotions budgets continued to grow, registering a fourth consecutive quarterly increase. However, the net balance fell to +3.2%, from +6.9% in the previous quarter, as UK inflationary pressures come back under control.
Finally, budget allocations were reduced for both market research, which saw its net balance drop to -1.5% from +3.2%, and other forms of paid marketing (-9.7% from -7.6%).
Sentiment towards company-own and industry-wide finances deteriorates
Bellwether data for Q3 indicated a shift in sentiment compared to the previous quarter, with attitudes toward company-specific prospects turning negative after nearly two years of optimism.
While a net balance reading of -2.2% indicated only slight pessimism regarding company-own financial outlooks, this marked the first time in seven quarters that the net balance posted below zero and highlighted a stark contrast to last quarter’s reading of +13.6% (which was almost a three-year high). Nearly a quarter (23.9%) of panellists expressed downbeat sentiment in the three months leading to September, a shade above the 21.7% who were positive.
Additionally, survey respondents were more negative about the outlook for their industry overall. The net balance of -16.2% in Q3 (previously -4.1%) was the lowest recorded since the closing quarter of 2022. A sizeable 29.6% of marketing executives reported a more pessimistic view of the broader industry's financial prospects, almost double the 13.4% who were optimistic.
Adspend forecasts revised up for 2024 and 2025
Since the last Bellwether survey, S&P Global Market Intelligence have upwardly revised their UK GDP growth forecast for 2024 considerably, to 1.2% from 0.6%.
This comes off the back of healthy figures in business surveys such as the PMIs, as well as stronger-than-anticipated quarterly GDP data through to the second quarter of 2024. In line with a stronger economic outlook, S&P Global has lifted its Bellwether adspend forecast to 0.6% in real terms for 2024, versus a flat estimate previously (0.0%). However, actual price levels, particularly for food and energy, remain a concern, and the high cost of borrowing — despite the interest rate cut in August — as well as higher personal taxation for many UK households are headwinds to growth.
Growth in 2025 is expected to be similar, with S&P Global Market Intelligence pencilling in a 1.3% annual GDP expansion, slightly above the 1.2% growth forecasted in the previous report. Positively, advertising spend is anticipated to pick up considerably next year, growing 1.3%. 2026 onwards should see GDP growth settle at the lower end of the 1% threshold, with adspend in real terms to rise at rates close to 2% in 2027 and beyond.
Commenting on the latest survey:
Paul Bainsfair, IPA director general said: "Negative hype surrounding the impending Budget has no doubt created choppy waters for UK companies and their marketers to navigate. Looking to the positives, this quarter’s results reveal that companies aren’t cutting their marketing budgets; they are pressing pause until they know more about the Government’s economic plans. As clarity emerges, this may indeed prove to be a temporary dip in overall marketing spend rather than the start of a long-term downward trend.
"Building on this, it is worth noting that our adspend forecast has been revised up for 2024 and 2025 because the economic data has been so strong so far this year, and that main media growth strengthened to a one-year high while sales promotion budget growth slowed – both of which are signals of bullishness.
"It is also worth remembering, as the expression goes, a smooth sea never made a skilled sailor. It is in the tough times that we know that our highly skilled, experienced agencies and their trusting, brave clients can reap significant market share for brands by continuing to invest in advertising. By raising their advertising voice when others go quiet - particularly in longer-term brand-building media, brands can achieve greater market stand-out, and in doing so strengthen their value and embolden their price elasticity."
Joe Hayes, principal economist at S&P Global Market Intelligence and author of the Bellwether Report: "After some bumper quarters for UK marketing spend, and a decade-high expansion in the last survey, the Q3 Bellwether report suggests that companies have dialled back their advertising activity levels. The result is disappointing and ends a strong sequence of growth, although perhaps it is more of a temporary step back as opposed to the start of a downward trend. One reason why this might be the case is the Autumn Budget, which is subject to much uncertainty about what new policies the government will announce. Fears of unfavourable taxation changes were frequently cited by panellists. Indeed, throughout the Bellwether survey's long history, there have been several general elections, and history tells us that political uncertainty often weighs on decision-makers."
James Ray, CEO, Armadillo and IPA Chair for England & Wales: “This quarter’s IPA Bellwether Report shows some interesting nuances, underneath an overall headline of advertisers soft-pedalling ahead of the upcoming budget.
“Looking at the data on evolution of marketing budgets, whilst as many businesses report cutting overall budgets as increasing them, brands have leant into focussed, precision and face-to-face channels harder, with PR, Events and Direct Marketing showing the greatest net increases. That points to great opportunities for clients and agencies that continue to prioritise effectiveness over all other KPIs.”
Helen Blakley, managing director, Genesis and IPA Chair for Northern Ireland: “As we move towards the end of 2024, the current wider political and economic backdrop has no doubt contributed to the cautious approach to marketing spends. Locally in NI, we have not escaped with the NI Executive dealing with reductions in finances which is affecting spends and whilst the recently published Ulster Bank survey noted that the private sector continued to grow in the third quarter, as always it is a mixed bag of those who consider marketing spends as an investment for future growth versus a potential opportunity to achieve short-term streamlining of costs. It is however encouraging that the latest Bellwether figures report a second consecutive quarter of budget increases for Main Media Advertising and with key demand drivers on the horizon with the likes of Black Friday and Festive period, ad spends may be looking up for 2025.”
Sue Benson, managing director, The Behaviours Agency and IPA City Head for Manchester & North West: “Whilst the Q3 2024 IPA Bellwether Report findings aren’t a surprise at all they are still disappointing given the record highs seen last quarter. Every time I talk to my colleagues in the North West the conversation is broadly the same - clients are putting projects on hold or pushing back spend to 2025. I feel like I have spent the last five years saying we’ll just get the ‘insert major event’ out of the way and then it will pick up. With adspend forecasts rising for the rest of 2024 and 2025. hopefully the business climate will improve after the Budget and I don’t find myself saying it will all change after the US election or in the new year!”
Sean Feast, co-founder and director, Gravity Global: “It comes as no surprise that Public Relations is expected to be an area of focus for UK marketers next year after a period where it appeared to go out of fashion as marketers were distracted by other, shinier toys in the toy box. It has been, and should always be, a central part of any marketing programme and I think smart marketers are recognising that it’s not a tool to be used in isolation. It’s a vital contributor not only to building and protecting reputations, but also being integrated with social and thought leadership for consistency through the line.”
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