Marketing budgets are up to their strongest levels since 2014, as companies seek recovery from the Covid-19 pandemic.
However, the Q1 2022 IPA Bellwether Report tempers that optimistic outlook against rising living costs, supply-chain disruption and the war in Ukraine.
As a result Adspend forecasts have been lowered in 2022 and 2023.
Speaking to Prolific North, Richard Aldiss, city head of IPA in Manchester and Managing Director of McCann Manchester said:
“Against the backdrop of the current economic landscape, I am encouraged to hear news of high levels of growth and do believe this is evidence that businesses are adjusting to life post Covid and the swell of optimism is clearly breeding an appetite for growth.
“However, inflationary pressures and interest rate rises will continue to drive tightening of consumers’ purse strings in the near term – in addition to on-going concern about the wider geopolitical situation. Therefore creative work rooted in purpose and effectiveness is likely to continue to take centre stage.”
According to Bellwether data, total marketing budgets were upwardly revised by nearly a quarter of panellists (24.1%). 10% recorded budget cuts, giving a net figure of +14.1%, compared to +6.1% in Q4 2021.
The best performing sector for the period was Events, which had a net balance of +18.7%, compared to -3.9% in the previous quarter. This came as pandemic restrictions were lifted across the UK.
Main media +9.4%;
Published brands +1.3%;
Sales promotions +8.0%;
Direct marketing +6.0%;
Those registering falls were Out of home (-4.6%) and audio (-8.5%).
Market research fell from +7.0% to -3.5% while the “other” segment, which accounts for any other form of paid-for marketing was -0.9%.
“With Covid-19 restrictions ending, it is clear that UK companies are keen to capitalise on this moment and ramp up their marketing spend. This is welcome news now, but we know we face soaring inflation levels, cost of living increases, supply-chain issues, all exacerbated by the war in Ukraine and some sector recruitment shortages,” said Paul Bainsfair, IPA Director General.
“With forty years of downturn data to learn from, the IPA knows beyond doubt that brands do best when they maintain their investment in longer-term brand-building media, complemented by a smaller ratio of sales activation media. This is the survival code for surviving a downturn.”
It is the inflation and squeeze on household budgets, coupled with supply chain issues and labour shortage which has seen a downward revision for adspend. Bellwether forecasts that these will be 3.5% in 2022 and 1.8% in 2022.
“We’ve seen strong upward revisions to marketing budgets in a clear sign that companies are gearing up for growth. Events budgets, which saw a particularly strong uplift, were a notable beneficiary of the UK government’s new COVID-19 model,” added Joe Hayes, Senior Economist at S&P Global and author of the Bellwether Report.
“That said, risks to the economic outlook have built substantially so far this year. Living costs are rising, we may see inflation get close to or even hit double digits in the coming months, and this will weigh on purchasing power. Supply chain issues are still prevalent and have been exacerbated by the war in Ukraine. Rising geopolitical tensions also create uncertainty, and it may lead to companies re-assessing their decisions until all of these risks reduce.”
The Bellwether is based on a questionnaire survey of around 300 UK-based companies. They provide quarterly information on trends in their marketing activities.