Q4 2013 Bellwether Report reveals 5th consecutive quarter of growth
The report, which has been conducted on a quarterly basis since Q1 2000, revealed a net balance* of +11% of companies registering an increase in budgets during Q4 2013 (down slightly on the series record of +12.3% in Q3).
*The net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision.
Companies also remained highly confident about their own financial prospects with the net balance of firms that have become more optimistic measuring +47.0%. (This is only slightly lower than the series record high registered in Q3 at +49.2%.) Companies are also buoyant about industry financial prospects in the coming months with the net balance unmoved at a series-record high of +35.4% in Q4.
This optimism looks set to continue into 2014 with provisional data for 2014 financial year budget plans revealing that a net balance of +25.8% companies are expecting to see growth, the most positive reading since 2008.
Additionally, the Bellwether’s predictive model, which is based on the Office for Budget Responsibility’s prediction for economic growth of 2.4%, forecasts a resultant 3.3% real term increase in adspend in 2014. In the longer-term, however, the predictive model anticipates a slowing in GDP and consumer spending growth in 2015 which will be offset by an upturn in investment, leaving adspend growth unchanged at 3.3%. A stronger economic recovery going forwards will then deliver a more substantial increase in adspend to over 4.0% in 2016, 2017 and 2018.
Internet spending budgets again recorded the sharpest improvement with a net balance of +9.2% and, within internet advertising, search also recorded an increase (+3.8%), although this is the lowest recorded rate of growth for both since Q1 2013.
Sales promotion (+1.9%), events (+1.8%), and direct marketing (+1.2%) also saw growth.
Main media advertising saw no change to budgets since the previous quarter, but falls were recorded elsewhere including PR (-2.8%), Market Research (-2.5%) and other paid for marketing activity (-2.3%).
Says Paul Bainsfair, IPA Director General: “The latest Bellwether Report findings once again will send an upbeat message to the advertising industry and the UK economy at large. With the current run of growth in marketing budgets now extending to five quarters, it seems companies are spending again to drive business growth. Confidence remains high as the economic situation continues to improve, this is encouraging to hear and welcome news.”
Says Chris Williamson, Chief Economist at Markit and author of the Bellwether Report: “The Bellwether survey indicates that marketing budgets are set to rise in 2014 to the greatest extent since 2008 as the UK’s economy recovery becomes more entrenched. The survey showed increasing numbers of companies setting their budgets higher than 2013 on the back of very buoyant optimism about their financial prospects. “The upbeat picture for 2014 comes on the back of another strong increase in marketing and advertising spend late last year, adding to signs that the economy ended 2013 on a firm footing.
“One of the most encouraging signals from the survey is the indication that companies are feeling more confident about investing in growing their businesses, advertising to build brands, supporting new product launches and taking the plunge in being more aggressive about boosting revenues. This increase in risk appetite should add to the sustainability of the economic recovery and represents a great start to the year.”
Highlights from the Q4 2013 IPA Bellwether Report have been summarised by Chris Williamson in this two-minute film.
The Bellwether Report is researched and published by Markit Economics on behalf of the IPA. First published on the 17th July 2000, it features original data drawn from a panel of around 300 UK marketing professionals and provides a key indicator of the health of the economy. The 8-page 16th January 2014 edition is available to purchase here for £99+VAT (IPA Members) and £140+VAT (non Members) as an immediately downloadable PDF. To sign up for an annual subscription, please contact firstname.lastname@example.org. Historical data is available on request to email@example.com.
What do you think of the latest findings? Join the conversation on twitter with #bellwether.
Here's what some experts from across sectors and around the UK think:
Says Rik Haslam, IPA Direct Marketing Group Chairman and Chief Creative Officer, Rapp: “Customer experience agencies have reason to expect 2014 to be a high growth year with direct clients more confident of budget increases than they have been for years. With internet channels booming too those direct agencies with strong digital abilities will likely prosper. “
Says Denise Turner, Head of Intelligence, Havas Media: “Market Research is a vital tool in the marketing director's armoury, giving them the confidence to make those big decisions about increased marketing investment. As such the investment in market research often comes before the increase in investment. So although we have seen a slight decline in market research in the last couple of quarters, it is higher than in 2013, and comes off the back of strong performance. We are also seeing the results played out in the very positive outlook we see for marketing spend as a whole.”
Says Paul Simonet, Creative Strategy Director, Imagination: “The recovery of the experience sector represents a recognition amongst clients that real personal experiences and interactions are crucial to the ongoing health of brands. Advertising is important and so is engagement. The next challenge is for experiences to build to deliver more content into consumers’ ongoing brand engagements as global success stories such as Land Rover do so well.”
Says Tom George, Chair of the IPA Media Futures Group and Chairman, MEC: “In 2013, media spend in the UK was at its most buoyant since 2010 with a 7% growth year-on-year. The ongoing optimism of the latest Bellwether Report as regards to advertising investment leads us to believe that 2014 should enjoy similar levels of growth with internet and paid search investment, driven by increase mobile internet usage, fuelling that growth again.”
Says Paul Mead, IPA Search Group Chairman and Founder & Managing Director, VCCP Media: “Another positive quarter for search engine marketing to end 2013 on a run of 18 consecutive upwards revisions. Both the search and internet advertising data in this latest Bellwether bodes very well for growth in 2014.”
Around the UK:
Says Claire Wood, IPA Chairman for Scotland, and Planning Director, Leith Agency: “2014 is a big year for Scotland with the Commonwealth Games, the Ryder Cup, the Year of the Homecoming and the Referendum. With the eyes of the world on Scotland, it's extremely reassuring to see the continued signs of economic growth indicated by the most recent Bellwether Report. This suggests that marketing budgets will increase for the fifth successive quarter, echoing the consumer optimism evident in the poll commissioned by think-tank British Future. Consistently good news for the communications industry in Scotland.”
England & Wales
Says Ben Quigley, IPA Chairman England & Wales and Group Chief Executive, Everything Different: “The latest Bellwether Report is further evidence of UK PLC’s strong recovery and is fantastic news. Five consecutive quarters of reported marketing budget growth reflects growing confidence and investment in UK advertising and the wider economy, which is good news for everyone.”
Says Andy Reid, IPA City Head for Bristol and Managing Director, McCann Bristol: "The results of the Bellwether Report are again genuinely encouraging and these certainly echo our own review. This, coupled with a very competitive agency employment market, 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 Andrew Wilson, IPA City Head for Birmingham and Chief Executive, WAA: “The IPA’s Bellwether Report forms part of a growing body of evidence indicating the strongest rate of economic growth in the last 15 years, with a 2014 prediction of 2.4% growth. This combined with an estimated uplift of 11% marketing spend for the fifth consecutive quarter echoes the Chancellor’s own sentiment earlier this year (January 2014) that UK businesses are at their most optimistic for the last 20 years. It is clear that companies are taking advantage of the renewed confidence of the economy by opting for more aggressive sales and marketing approaches, indicating recovery is broadening out from an initial consumer-led upturn to a wider upturn across corporate spending. This can only be welcome news for businesses in the West Midlands. Increased confidence combined with the value-centric culture cultivated during the downturn has led business away from the pre-recession thinking of London agency at all cost. Instead the agency landscape has levelled and work will be won and lost on merit and not geography.”
Says Peter Craven, IPA City Head for Manchester and co-founder, Madhouse Associates: "I am very encouraged by the sustained growth of marketing budgets as shown in the report, this bodes really well for Manchester agencies looking at the year ahead, what a great and promising start to 2014."
Says Stephen Roycroft, IPA Northern Ireland Chairman and Deputy Managing Director, Ardmore Advertising: “It is particularly encouraging that the advertising and marketing industry not only reflects the steady optimism in the market, but that it is a proven engine for growth. Marketing budgets are investments not costs; and at the IPA there is an enormous body of case evidence to demonstrate the contribution our members make to client businesses surviving and then benefitting from an upturn.”