“Cautious” marketers put budgets in reverse, says Bellwether

Mon, 12 Jul 2010 | By Russell Parsons

The quarterly survey, carried out by Markit Economics on behalf of the IPA and BDO, shows almost 20% of those polled adjusted spend downwards in the three months to 30 June versus 15% that noted an increase, a net balance of 4.6%.

The reverse comes as a blow following the uplift of 4.5% Bellwether found in the first quarter, when marketing budgets increased for the first time since the global economic crisis started.

Confidence among those polled also dipped. A greater proportion of executives polled were more pessimistic about the financial prospects of their company than they had been at the start of the year, up to 25% from 20% in the first quarter.

The number feeling confident was flat at about 41%.

Chris Williamson, chief economist at Markit and author of the Bellwether report, says the downward revision was “disappointing” following the uplift seen in the first quarter.

“Companies are exercising increased caution in their expenditure in the face of likely slower economic growth in the second half of the year,” he adds.

The gloomier forecast from marketers comes amid fears that the recovery in the UK economy is also faltering.

Financial think-tank the National Institute for Economic and Social Research said last week that quarter on quarter growth slowed to 0.7% in the three months to June, from 0.9% at the start of the year.

Many observers fear that the UK economy could be hit again in the next year after VAT increases to 20% in January and the extent of public sector job losses becomes known.

Despite the more pessimistic picture that emerged from Bellwether in the second quarter, other recent evidence suggests that advertising spend will grow this year following falls in the wake of the 2008/09 global recession. The latest Advertising Association/Warc data predicted overall market growth of 3.3% in 2010.

Commenting on Bellwether, Rory Sutherland, IPA President and vice-chairman of Ogilvy Group UK, says the “cautious” approach shown by marketers in the second quarter is understandable given the “uncertain” nature of the economy.

“However, though this indicates a less optimistic picture than previously thought for this year, marketing spend is still set to increase,” he adds.

Direct marketing, internet and internet search were the only media channels forecast to increase, according to Bellwether, with the net balance of those predicting uplift 1.2%, 10.1% and 6.6% respectively.

Sales promotion is expected to experience the steepest drop, by -11.5%.