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IPA Bellwether: Marketing budgets strongest in a decade after 11th consecutive rise

Inflation and energy costs may remain stubbornly high as we embark on a new year, but total marketing budgets in Q4 2023 saw the “strongest upward revisions” since 2014, according to the IPA’s latest Bellwether Report.

The quarterly study of marketers’ confidence and media spend decisions, revealed that14.7% of marketers reporting an increase in their total marketing budgets over the quarter – the highest level since Q2 2014 and more than double the figure from the previous quarter’s 5.3%.

This marks the 11th consecutive quarter of a net increase in total marketing budgets — the longest uninterrupted period since 2018, despite the “intensely challenging backdrop for UK businesses” the figures sit against.

By channel, five of the seven sectors analysed recorded positive net balances: Events (15.9%), direct marketing (12.6%), PR (1.9%), main media advertising (1.9%) and sales promotions (1.4%).

The double-digit growth in events and direct marketing looked particularly healthy and were highlighted by the IPA as “the principal drivers” of growth.

Breaking down the ‘main media’ category by subcategory, only video (6.6%) and other online advertising (13.2%) were actually in the black, with audio (radio and other audio), published brands (print or online) and OOH and other online advertising all notching negative net balance.

The other two main categories, market research (net balance of -5.0%, from -1.5% in the previous quarter) and other (-6.4%, from -7.9%) also recorded consecutive contractions.

Looking further ahead to 2024 and 2025, the results showed planned budget expansions at 44.5% of respondents, around triple (15.1%) those that were restricting spending plans in the 2024/25 period and resulting in a net balance of +29.4% of companies with stronger budgets than the last financial year.

Conversely, the report predicted that ad spend would fall slightly in real terms over the course of 2024. For the year as a whole, S&P’s forecast is for a 0.1% contraction (as was also the case in the Q3 forecast), as high borrowing costs and still-elevated inflationary pressures constrain economic activity. Consequently, S&P forecasted adspend declining in real terms in 2024 by 0.7%.

For the second half of 2024, however, the economy should return to growth, for which S&P’s ad spend forecast outlook for 2025 and beyond is more positive at 1.1% in 2025 and stronger expansions in 2026 through to 2028 (1.7%, 1.9% and 1.9% respectively).

Reaction to the report was largely positive. Richard Aldiss, managing director, McCann Manchester and IPA Chair for England & Wales, said: “I draw a lot of confidence from the data that shows businesses and brands taking a long-term perspective on marketing investment, despite the continuing challenging economic climate.

“Adopting a pro-active approach in ‘24 and seeing opportunity where others find problems is a steadfast strategy for growth.”

Sue Benson, managing director, The Behaviours Agency and IPA City Head for Manchester and the North West, said: “I suspect both agencies and clients will be breathing a sigh of relief when reading this quarter’s report. We have another fun packed year ahead of us – recessionary pressures, an election, the Olympics and Euro’s all set to try our marketing resilience. Plus, we’re seeing evidence of consumer behaviour changes that were born out of the cost-of-living crisis now becoming a habit. Marketers need to use this newfound optimism and possible budget upweights to double down on brand investment, ensuring their brands deliver on the value exchange with their customers.”

Alex Uprichard, managing director, IMA-HOME and IPA City Head for Leeds, Yorkshire and Humberside, added: “The Q4 Bellwether report is a welcome indicator for the year ahead given there is notable expectation for growth in marketing budgets for 24/25.

“It’s great to see this confidence despite ongoing economic uncertainties. Clearly the prospect of opportunity and potential for growth is winning out in budgetary decision making.

“The continued increase in investment in events and direct marketing also suggests we’re in for some really exciting work in 2024. It’s something we’re already seeing from our retail clients – a focus on one-to-one connections with consumers through experiences that offer both value in the moment and reward loyalty over time.

“That long-term view is so important as consumers will remember the brands who were there in tougher financial circumstances when spending restraints ease.”

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