UK ad spend is set to rise by just 0.8 percent this year according to the Institute for Practitioners in Advertising’s (IPA) Q1 2018 Bellwether Report. Despite many agencies predicting more favourable conditions this year leading to a recovery in ad spend growth, the IPA predicts that growth will actually drop in the UK, having reached 1.7 percent last year.
The prediction appears to demonstrate the pressure Brexit is putting on the UK’s ad industry. The large holding groups have pointed to an increasingly healthy global economy, as well as a number of large advertiser-friendly events (including the FIFA World Cup and the royal wedding) as causes for optimism that ad spend growth will be high.
But Brexit uncertainty appears to be putting a damper on UK marketing budgets. “Rising costs and the ongoing uncertainty that exists over the future direction of the UK economy in a post Brexit world have led to caution and belt-tightening across a number of sectors, especially those more exposed to retail and consumption,” said Dr. Paul Smith, director at IHS Markit and author of the Bellwether Report.
The Q1 survey found that overall, 22.9 percent of companies saw their marketing budgets increase during the previous quarter, while 17.9 percent saw a decrease, a net balance of 5.0 percent, down from 8.6 percent in the previous survey. Due to financial pressures and challenging market conditions, many marketing executives reported that marketing budgets have been directed towards other business areas.
The report forecasts that these negative conditions will continue into 2019, where ad spend growth of just 0.4 percent is predicted, but says that stronger gains are anticipated for 2020-2022.
The IPA’s director general Paul Bainsfair stressed however that although ad spend growth is low and market conditions are difficult, there is still cause for optimism. “”Despite the slowdown, this quarter’s results mark over five years of successive upward revisions to marketing budgets, signifying that regardless of external pressures – particularly Brexit uncertainties – most marketers still appreciate the value of advertising in building and maintaining their brands,” he said.
Bainsfair also welcomed digital advertising’s continued growth. “Once again we are also seeing significant investment in internet budgets – for 35 quarters continuously – showing that in an ‘always on’ world, marketers are following the eyeballs,” he said.
But while internet advertising remained the best performing Bellwether category, it did show signs of weakness. Its net balance (percentage of marketers with increase budgets minus percentage of marketers with decreased budgets) of 8.7 percent was the lowest recorded by the IPA since the end of 2015.
Mobile in particular saw a sharp retraction in budgets, with its net balance falling to 0.0 percent, from 6.0 percent in Q4 2017.
Meanwhile net balance for main media advertising, a category which includes big-ticket campaigns related to TV, radio and cinema, slipped into negative territory, falling to -2.1 percent from 1.7 percent last quarter.
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