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Marketing spend revised up at highest rate in nearly six years

Published on Monday, 15th July 2013
The latest IPA Bellwether survey shows a sharp upward revision in marketing budgets in Q2 2013. The rise is the highest in almost six years.

The latest IPA Bellwether survey  shows a sharp upward revision in marketing budgets in Q2 2013. The rise is the highest in almost six years.

Businesses have sought to take advantage of improving economic conditions by supporting sales efforts and new product launches. With 22% of companies reporting an upward revision to their marketing budgets during the latest survey period, compared to 15% that indicated trimming, the resulting net balance* of +7.3% was the highest since Q3 2007.

*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.

The positive showing for Q2 will bolster hopes that the sustained period of marketing cuts that have been evident since the beginning of the financial crisis will come to an end this year. A net balance of +13.5% of companies have pencilled in a net increase in marketing budgets during 2013 as a whole, the most positive forecast for two years.

The marked upward revision to total marketing budgets in Q2 was accompanied by growing confidence amongst companies regarding their financial prospects. Companies are at their most upbeat since Q3 2009 (a net balance of +27.6% being a sharp improvement on Q1’s +16.8%).

Bellwether has long been seen as a predictor of the overall state of the economy in the UK. The evidence provided in the Q2 2013 report adds to evidence that the UK economy is strengthening heading into the second half of 2013.

Business surveys have already signalled that GDP growth is strengthening in Q2, with the economy set to expand at a quarterly rate of 0.5%. This will bolster hopes that 2013 will prove to be a much better year for economic growth than expected and lead to further upward revisions in marketing budgets as the year progresses.

By sector

Detailed data has shown that 0nce again internet is the key driver to overall budget growth (net balance of +17.4%, a stark improvement on the previous quarter’s +8.9% and the best reading since Q1 2010). A further four categories also registered upward revisions to budgets led by PR, a recent addition to the survey, with a net balance of +3.4% the highest in three quarters of data collection. Sales promotion (+2.0%) main media advertising (+1.9%) and direct marketing (+0.6%) also recorded upward budget revisions. Market research budgets were unchanged. However, there were falls seen in ‘other’ (-3.2%) and events (-0.9%).

Says Andy Reid, IPA City Head for Bristol and Managing Director of McCann Bristol; “The results of the Bellwether Report are genuinely encouraging and these certainly echo our own review. This, coupled with other recent studies reporting that consumer confidence is mounting, further points to real economic recovery in the UK. Companies are seeing a significant increase in business converting within the last quarter, with clients starting to confidently place a far larger emphasis on the importance of investing in their marketing spend - without compromising the ROI.”

Says IPA Director General Paul Bainsfair; “This is very encouraging; with the upward revision of marketing spend in Q2 the highest for almost six years. Companies are beginning to shake off the cloak of recession and are becoming more confident in the economy. This bodes extremely well for continued growth in marketing spend for the rest of 2013. These figures should send a very upbeat message to the wider economy”.

Says Chris Williamson Chief Economist at Markit and author of the Bellwether report; “The second quarter is looking like one of the best we've seen since the onset of the financial crisis in terms of a positive signal for marketing budgets and the wider economy. 

The latest Bellwether survey shows companies taking an increasingly aggressive stance with regard to boosting their marketing expenditure, which in turn reflects their views on financial prospects having improved dramatically over the course of the year to date. Marketing spend looks set to rise in 2013 for the first time in six years as companies finally perceive a brightening business outlook at home and abroad.

With marketing spend a key barometer of the health of the economy, not only is GDP growth likely to have accelerated in the second quarter, but the Office for Budget Responsibility's official forecast of 0.6% economic growth this year is all of a sudden starting to look overly pessimistic.”