The Media in Figures: Marketing budget growth sustained in Q1 2017

UK marketers have revised their budgets up in Q1 2017, with significant growth recorded in internet and main media advertising categories, reveals the latest IPA Bellwether Report.

The latest results extend the record run of growth to marketing budgets to four-and-a-half years and detail marketers’ positive budget plans for 2017/18.

The report, which has been conducted on a quarterly basis since Q1 2000, reveals a net balance of +11.8 per cent of companies registering an increase to their budgets during Q1 2017, down only fractionally from Q4 2016’s net balance of +12.9 per cent (the net balance is calculated by subtracting the percentage reporting a downward revision from the percentage reporting an upward revision).

Looking ahead to 2017/18 budget plans, UK marketers have indicated a positive outlook, with a net balance of +26.1 per cent of companies signalling growth in their total budgets for the coming year.

Although indicative of a marked degree of confidence, notably year ahead expectations continue to lag those seen prior to the start of the global financial crisis in 2008.

By sector

The latest survey again highlighted that budgets were raised across a broad-range of Bellwether categories, led by internet where growth picked up to the highest recorded in just under four years (net balance: +16.9 per cent, from Q4 2016’s +12.1 per cent).

Within this category, marketing activities related to search/SEO rose to the greatest degree in over two years, as highlighted by the net balance improving to +15.1 per cent (from +7.1 per cent in the preceding quarter).

Mobile-based advertising also picked up, with the net balance of +10.3 per cent (Q4 2016: +3.9 per cent) the highest recorded in the short three-quarter series history.

Main media advertising also enjoyed a strong upward revision to budgets during the first quarter of 2017. The respective net balance jumped to +10.7 per cent during Q1, up from +5.1 per cent in Q4 2016 and the best recorded by the survey for just under three years.

Elsewhere, direct marketing budgets increased to the greatest extent for two years following stagnation in the previous quarter (net balance: +5.3 per cent, from 0.0 per cent), while there was a noticeable slowdown in the events category. Latest data showed the respective net balance declined to +4.9 per cent, from +12.3 per cent in the previous quarter and the lowest reading recorded by the survey for over a year.

Other categories that registered an increase in marketing spend included sales promotions (+1.2 per cent) and PR (+1.1 per cent). However, ‘other’ (-4.5 per cent) and market research (-9.9 per cent) both recorded deteriorating budget positions relative to those at the end of 2016.

Financial prospects

Latest data revealed an improvement in company financial prospects during the first quarter of 2017.

With over 32 per cent of the survey panel indicating positive financial prospects, compared to under 19 per cent that indicated a fall, the respective net balance of +13.9 per cent was up from +11.2 per cent in the previous survey period and the best recorded in over a year. That said, the degree of confidence remains well down on those levels seen over the period 2013-2015.

Confidence around wider industry business prospects remained inside negative territory for a fifth successive quarter. However, the net balance also showed an improved trend, rising to its highest level since the end of 2014. This was highlighted by a rise in the net balance to -5.7 per cent, from -14.6 per cent in the previous quarter.

Adspend forecast to grow

With the UK economy showing considerably more resilience during the second half of 2016 than was generally envisaged by economic commentators, this momentum is now forecast to carry through into 2017.

Although GDP growth is expected to slow in the first quarter of the year, the economy seems to have sufficient momentum to grow at a solid pace in 2017 (the OBR are expecting a rise in GDP of two per cent). The Bellwether therefore predicts that this will help lift adspend by 0.6 per cent in real terms over the year as a whole (previous forecast: -0.7 per cent).

Further out, Bellwether predicts a stagnation in adspend in 2018, before growth recovers in 2019 and 2020 to rates of 1.8 per cent and 2.3 per cent respectively. However, given the difficulties in trying to predict the effects on the economy of Brexit negotiations and subsequent UK departure from the EU in 2019, current forecasts remain especially uncertain.

Source: IPA, April 19 2017.