If budgets were marketing campaigns, then the Autumn budget would have flopped before it even came to market.

This negative sentiment has had a knock-on impact on marketing budgets, traditionally the canary in the coal mine for wider business sentiment.

According to the Bellwether revisions, total marketing budgets were put on ice during the third quarter of 2024. A cooling which reflects the broader uncertainty surrounding the imminent Autumn Budget, which is prompting a more cautious approach from UK companies.

The Q3 findings reveal that the respective net balance of UK companies revising their marketing budgets up (21.6%) vs revising them down (21.6%) has dropped from +15.9% in Q2 to 0.0%. This demonstrates a significant shift in behaviour from the robust growth observed over the previous 13 quarters, which had averaged an impressive net balance of +8.8%.

Yet despite this gloom, some growth areas remain. Despite the downbeat mood the advertising the caged bird still sings: with ad spend forecasts lifted for 2024 and 2025.

Don’t let caution be the thief of creativity

Despite this renewed apprehensive approach to marketing budgets, the category breakdown revealed several strong-performing media categories in the third quarter. Notably, public relations saw the most significant upward revision, with the net balance soaring to a record high, up 11.0%, from a 2.6% increase in the previous quarter.

The post-Covid reappraisal of experiential and events also continues, although growth stalled. Events saw a 9.9% increase, compared to 17.2% previously. Data which underlines that demand for in-person and face-to-face interactions with customers and prospects remains strong.

Direct marking followed closely behind, with the net balance printing the strongest reading in three quarters, rising 9.7%, signalling a continuation of this segment’s impressive growth streak.

Main media advertising experienced a second consecutive quarter of budget increases, with the net balance climbing from a 3.5% increase to 4.3% increase, indicating the strongest growth in a year.

This growth was driven by big-ticket video campaigns, which saw the net balance of firms registering upward revisions of 11.7%, the highest increase since Q4 2022. This surge masked declines in the remaining segments.

With the out-of-home category hitting national headlines at Euston station when the government placed a pause on advertising, there was more bad news for the sector. Following stabilisation in the previous quarter, out-of-home experienced the most significant downward revisions to marketing expenditures in the third quarter. The net balance fell back into contraction territory, with a decline of 15.7%, marking the steepest decline since Q2 2022.

Audio weighed down main media marketing, with the net balance dropping by 10.0% from minus 5.5%. Published brand advertising also declined by 4.4%, while online marketing budgets declined by 1.4%, a downturn which represents the discipline's first negative net balance in four years.

Sales promotions budgets continued to grow, registering a fourth consecutive quarterly increase. However, the net increase fell to a 3.2% increase, down from a 6.9% increase in the previous quarter, as UK inflationary pressures came back under control.

A creative crisis of confidence

Sentiment towards company own and industry-wide finances also turned negative after almost two years of optimism.

While a net balance reading of a 2.2% decline, the report marked the first time in seven quarters that the net balance went into the negative. A stark contrast to last quarter's upbeat reading of a 13.6% increase.

Nearly a quarter (23.9%) of panellists expressed downbeat sentiment in the three months leading to September, a shade above the 21.7% who were positive.

Additionally, survey respondents were more negative about the outlook for their industry overall. The net balance of a decline of 16.2% in Q3  was the lowest recorded since the closing quarter of 2022. Over a quarter (29.6%) of marketing executives reported a more pessimistic view of the broader industry's financial prospects, almost double the 13.4% who were optimistic.

Adspend forecasts revised up for 2024 and 2025

Despite the negative headwinds, green shoots are on the horizon. Since the last Bellwether survey, S&P Global Market Intelligence have upwardly revised their UK GDP growth forecast for 2024 considerably to 1.2% from 0.6%.

This comes off the back of healthy figures in business surveys such as the PMIs, as well as stronger-than-anticipated quarterly GDP data through to the second quarter of 2024. In line with a stronger economic outlook, S&P Global has lifted its Bellwether adspend forecast to 0.6% in real terms for 2024, versus a flat estimate previously (0.0%). However, actual price levels, particularly for food and energy, remain a concern, and the high cost of borrowing — despite the interest rate cut in August — as well as higher personal taxation for many UK households are headwinds to growth.

Growth in 2025 is expected to be similar, with S&P Global Market Intelligence pencilling in a 1.3% annual GDP expansion, slightly above the 1.2% growth forecasted in the previous report. Positively, advertising spend is anticipated to pick up considerably next year, growing by 1.3%. 2026 onwards should see GDP growth settle at the lower end of the 1% threshold, with adspend in real terms to rise at rates close to 2% in 2027 and beyond.

Paul Bainsfair, Director General at the IPA, said: “Negative hype surrounding the impending Budget has no doubt created choppy waters for UK companies and their marketers to navigate.”

He continued: “Looking to the positives, this quarter’s results reveal that companies aren’t cutting their marketing budgets; they are pressing pause until they know more about the Government’s economic plans. As clarity emerges, this may indeed prove to be a temporary dip in overall marketing spend rather than the start of a long-term downward trend.”

Taking a glass-half-full approach to the data Bainsfair noted that the reason the Bellwether's adspend  forecast has been revised up for 2024 and 2025 is because the economic data has been so strong so far this year. He highlighted that main media growth strengthened to a one-year high while sales promotion budget growth slowed – both of which are signals of bullishness.

He continued: “It is also worth remembering, as the expression goes, a smooth sea never made a skilled sailor. It is in the tough times that we know that our highly skilled, experienced agencies and their trusting, brave clients can reap significant market share for brands by continuing to invest in advertising. By raising their advertising voice when others go quiet - particularly in longer-term brand-building media, brands can achieve greater market stand-out, and in doing so strengthen their value and embolden their price elasticity.”

Marketing leaders have their say on the Q3 Bellwether report

Joe Hayes, Principal Economist at S&P Global Market Intelligence and author of the Bellwether Report

After some bumper quarters for UK marketing spend, and a decade-high expansion in the last survey, the Q3 Bellwether report suggests that companies have dialled back their advertising activity levels. The result is disappointing and ends a strong sequence of growth, although perhaps it is more of a temporary step back as opposed to the start of a downward trend. One reason why this might be the case is the Autumn Budget, which is subject to much uncertainty about what new policies the government will announce. Fears of unfavourable taxation changes were frequently cited by panellists. Indeed, throughout the Bellwether survey's long history, there have been several general elections, and history tells us that political uncertainty often weighs on decision-makers.

Anna Forbes, Regional Vice President, Northern Europe, DoubleVerify

The latest IPA Bellwether highlights that businesses are preparing to navigate potential challenges in Q4. With the first Labour Government budget approaching and global conflicts intensifying, brands are operating in a complex environment where the risk of misinformation and inflammatory content is on the rise. It’s therefore imperative that advertisers harness solutions that will help them navigate nuanced brand safety and suitability challenges while still driving performance. 

This is especially important in formats where investment is increasing, including video, as highlighted in the report. As money flows into these areas, bad actors inevitably follow, including those behind sophisticated ad fraud schemes.

While AI is driving challenges, such as low-quality made-for-advertising sites and disinformation, it also provides solutions to counter these threats. That’s why it’s encouraging to see many companies in the IPA Bellwether already integrating generative AI into their strategies. AI is proving to be a powerful tool for analysing and optimising media, ultimately enhancing brand performance and driving business outcomes.

James Ray, CEO, Armadillo and IPA Chair for England & Wales

This quarter’s IPA Bellwether Report shows some interesting nuances, underneath an overall headline of advertisers soft-pedalling ahead of the upcoming budget. Looking at the data on evolution of marketing budgets, whilst as many businesses report cutting overall budgets as increasing them, brands have learnt to focussed, precision and face-to-face channels harder, with PR, Events and Direct Marketing showing the greatest net increases. That points to great opportunities for clients and agencies that continue to prioritise effectiveness over all other KPIs.

Helen Blakley, Managing Director, Genesis and IPA Chair for Northern Ireland

As we move towards the end of 2024, the current wider political and economic backdrop has no doubt contributed to the cautious approach to marketing spends. Locally in NI, we have not escaped with the NI Executive dealing with reductions in finances which is affecting spends and whilst the recently published Ulster Bank survey noted that the private sector continued to grow in the third quarter, as always it is a mixed bag of those who consider marketing spends as an investment for future growth versus a potential opportunity to achieve short-term streamlining of costs. It is however encouraging that the latest Bellwether figures report a second consecutive quarter of budget increases for Main Media Advertising and with key demand drivers on the horizon with the likes of Black Friday and Festive period, ad spends may be looking up for 2025.

Chris Falconer, Group Managing Director at McCann Central

Following a strong first half of the year, marked by significant new business wins and growth within our existing client base, we did notice a slowdown, with some clients becoming more cautious. As we approach the end of the year, we’re continuing to invest in areas of the business where we are seeing increasing demand, such as Social, PR, and Media as well as our core advertising business. While we have an exciting pipeline lined up for 2025, securing new business remains crucial to closing out 2024 on a high note and positioning ourselves for success in the year ahead.

Sue Benson, Managing Director, The Behaviours Agency and IPA City Head for Manchester & North West

Whilst the Q3 2024 IPA Bellwether Report findings aren’t a surprise at all they are still disappointing given the record highs seen last quarter. Every time I talk to my colleagues in the North West the conversation is broadly the same - clients are putting projects on hold or pushing back spend to 2025. I feel like I have spent the last five years saying we’ll just get the ‘insert major event’ out of the way and then it will pick up. With adspend forecasts rising for the rest of 2024 and 2025. Hopefully the business climate will improve after the Budget and I don’t find myself saying it will all change after the US election or in the new year!

Alex Pym, CEO International at Acxiom

With the latest IPA Bellwether report showing an overall decrease in marketing spend ahead of the Budget, it’s crucial that brands adopt a strategic approach to how they allocate their resources. While the economic landscape remains challenging, there are still opportunities for companies to leverage their customer insights more effectively, helping maintain relevance and boost engagement with their key audiences.

Even in difficult times, the demand for personalised, data-driven experiences stays high, with over half (51%) of consumers still expecting tailored interactions from the brands they engage with. Rather than cutting back entirely, businesses should streamline their marketing strategies and ensure that any investment in data intelligence and personalisation is laser-focused on delivering measurable results. Tough times call for smart marketing. Leveraging data to better understand customer behaviour can help brands weather the storm and set the foundation for future growth.

Hugh Stevens, UK Managing Director, LiveRamp

While the latest IPA Bellwether report suggests that reduced spend in Q3 was a temporary measure in the face of the Autumn budget, marketers should be cautious about swiftly pulling back budgets, even in the short term. Experience has shown that brands who maintain marketing spend through precarious economic straits often rebound the quickest. In the same vein, they should also be conservative toward promotion activity, as consistently lowering prices can damage brand value and will therefore hamper businesses’ ability to scale revenue in the future.

However, there are some signs that consumer confidence is buoyant. With easing inflation and an expected relief in the cost-of-living crisis highlighted across those vertical respondents in the report, including FMCG and Retail, marketers should focus on targeting their high-value audiences with the greatest propensity to spend.

The key to this is first-party data, which provides rich insight into customer behaviour, including buying intent and interest. When combined with partner datasets through data collaboration, this unlocks a full 360 view of the customer’s purchasing journey across channels and platforms. Brands can use this oversight to optimise their media targeting and planning, improving outcomes and driving long-term business value. Now is the time to embrace data collaboration and ensure your brand is front and centre with customers.

Jim Rudall, Head of EMEA, Intuit Mailchimp

Responsible investment and the return on that investment is always critical. And in the current climate, ROI holds even greater importance, as shown by IPA Bellwether’s report revealing UK companies are putting some marketing spend on ice amid uncertainty ahead of the Autumn Budget. With every penny needing to deliver results, marketers should focus on strategies that will help them stand out and drive deeper connections. Consumers are overwhelmed by content, which can make it harder than ever to break through. Personalisation is paramount. In fact, data from our brand trust report reveals that in this era of information overload, nearly half (48%) of consumers expect the right products and services to come to them. To truly connect, marketers must harness AI to deliver personalised experiences at scale, ensuring every investment can make a meaningful impact. Those who do will march ahead of those who are holding back.