Retail’s golden quarter has helped to revive small growth to advertising budgets, but the repercussions of budget-induced caution continue to impact the advertising industry, according to the findings of the latest IPA Bellwether Report.

The report, published today (16th January), shows UK companies revised marketing budgets up marginally in Q4 2024 after flatlining in Q3. The findings suggest that high interest rates and the ongoing cost of living pressures will lead to modest, but nonetheless, growth in 2025 for adspend.

Budget bounce-back

Uncertainty surrounding Labour’s first budget led to caution from companies. Many of which pressed pause on growth plans in Q3. While the Autumn budget left businesses with costing challenges and changes to National Insurance contributions, Rachel Reeves’ announcement ripped off the band-aid and left companies feeling more optimistic to plan ahead.

The Bellwether reports that over a fifth (21.7%) of panellists increased their total marketing budgets during the fourth quarter of 2024. A figure higher than the almost 19.9% who made cuts, resulting in a net balance of +1.9% (up from 0.0% in Q3). This meant that upward revisions to advertising spend have been registered in 14 out of the last 15 quarters.

Cuts to main media spend

While overall the ad spend picture is one of marginal growth, notably main media advertising saw reductions in Q4. The category reports a net balance of -4.3%, down from +4.3%.

“Digging into the detail, it's disappointing to see reductions in Main media budgets, which remain the most effective channel for sustaining and growing brands in the long term.” says Paul Bainsfair, IPA Director General.

He continues: “Cuts to this category are not uncommon in tougher times given their need for greater financial contribution, which is also why we’ll often see concurrent increases by marketers to other shorter-term media.”

Within main media Audio (net balance of -17.4%, from -10.0%), Out of home (-12.8%, from -15.7%), Video (-10.7%, from +11.7%) and Published brands (-10.2%, from -4.4%) all saw contractions.

In times of economic uncertainty, it is not unusual to see brands lean toward more short-term strategies, yet the advertising industry would urge businesses to look at the bigger picture and continue to invest in the long term.

In line with this direct marketing (net balance of +5.6%, down from +9.7), sales promotions (+4.1%, up from +3.2), and market research (+3.1%, up from -1.5%) were categories that all experienced growth.

Events and PR also saw significant category growth at +12.3% and +6.8% respectively. Events continue to draw in crowds post-pandemic as in-person connection enables businesses to build deeper relationships with their audiences.

“The growth in Events and Direct marketing aligns with what many of us are seeing on the ground – clients are eager to connect directly with customers and drive tangible results. Hopefully, the optimism shown in the 2025/26 budget plans will translate into bolder main media investment as we head into the year,” says Sue Benson, Managing Director of The Behaviours Agency and IPA City Head for Manchester & North West.

A gloomy start to 2025

Bellwether firms assessments of their industries were negative as 2024 drew to a close. The quarter saw the highest degree of pessimism since Q4 2022 with -20.1% of panellists foreseeing a deterioration in financial prospects at the industry level. However this figure is much lower at individual business level, with only a slight degree of pessimism at -1.2%.

As we enter 2025, businesses are cautious. The data revealed that 34.9% of panellists anticipate a worsening industry outlook, while 14.8% expect improvements.

Yet, revisions from S&P Global Market Intelligence are narrow and growth is forecast for 2025 at 1.3%, up from 1%.

While interest rates remain high and cost of living pressures continue, some remain optimistic that consumer confidence is set to grow. Elsewhere US import tariffs and increased National Insurance business contributions are yet to make their impact.

The industry has many challenges and opportunities ahead, as we wait on tenterhooks for a clear picture for 2025 to emerge.

The industry weighs in on the IPA Bellwether:

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

The pause in UK marketing budget growth seen in the third quarter, was very much that, a pause. It's encouraging to see there was a resumption of growth at the end of 2024, meaning 14 of the past 15 quarters have seen increases. That said, the post-Autumn Budget rebound was a shallow one, indicating that companies trod carefully as they assess the impact that some of the announced policies would have on their bottom lines.

Bill Doris, VP Analytics, EMEA, EssenceMediacom & IPA Media Research Advisory Group Chair

Good news for Market research! The latest IPA Bellwether Report shows a resurgence in the research sector. Budgets bounced back in Q4 2024, and we're seeing a continued upswing heading into 2025. Businesses are doubling down on research into their brands, consumers and markets, and the future looks bright for Market research as we head into 2025.

Gill Jarvie, Client Services Director, Republic of Media and IPA Chair for Scotland

It is heartening to see a return to growth in the latest Bellwether Report, although it’s disappointing that this doesn’t seem to have followed through into Main media where there was a net balance of -4.3% (down from +4.3% in Q3). Audio took the biggest hit (-17.4%) but the trend was downward across most media. On a positive note, the outlook for Main media is sitting at +6.4% for 2025/26, although this is conservative compared to an overall marketing sector outlook uplift of +25.6%.

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

It is encouraging to see an anticipated increase, albeit a shallow one, to budgets for 2025 and whilst cautious, there is still a sense of optimism as we embark upon 2025.  There are many things for the industry to navigate this year.  Firstly, the increased operating costs from the National Insurance raise and then later in the year the introduction of the new advertising legislation for HFSS/Less Healthy Foods. We are still to understand the intricacies on the latter as the ASA/CAP work through the implementation guidance, but going live from October 2025, this will be a key area to navigate for the Food & Drink sector and clients. Thankfully, problem solving is a core strength of our sector, so we will work in partnership with our clients to navigate what lies ahead and may affect the latter half of 2025 activities in this area.”

Alex Uprichard, Managing Director, IMA and IPA City Head for Leeds, Yorkshire and Humberside

Like many, we are looking to 2025 with a sense of optimism and seeing this supported with UK marketing spend returning to growth in Q4 2024 is a positive boost. That said, there is still some degree of uncertainty as to the impact of new government policy, and with businesses having to bear the brunt of additional costs, 2025 is sure to be a year where marketing and agencies have to evidence why investment matters more so than ever. This is no doubt a factor in the continued pattern of redistributing Main media investment into the direct communication and instant gratification that can benefit both the consumer and the brand via events and promotional activity. However, we know from experience, sustainable growth means priming future audiences as much as harvesting existing demand that balance and agencies that can plan and activate across the whole journey will be ever more critical in deciding the winners and losers in the coming year.

Guy Jackson, Chief Commercial Officer at RAAS LAB

Despite the lingering effects of a challenging economic climate, the latest IPA Bellwether report offers an encouraging outlook on the industry's relative optimism for the year ahead.  While caution remains (it always does), I hope that one New Year's Resolution is top of the list: to embrace AI.

Rapidly solidifying its place as an essential tool in the industry. AI unsurprisingly makes a strong appearance in the report. Allocating budget towards AI-driven solutions is no longer an option—it’s essential for better performance. Of note is the report’s focus on the technology’s strength for personalisation. This includes reaching and engaging audiences with hyper-relevant ads in moments of intent and inspiration.

This AI-led creativity promises to establish a new standard of premium media performance, and as investment rises, we’ll be sure to see interesting developments within this space.

Julie Selman, SVP, Head of EMEA at Magnite

The decline of video in the Q4 2024 IPA Bellwether report is unexpected, especially after such strong figures earlier in the year. This shift underscores the volatility of today’s media landscape, where macroeconomic pressures and evolving consumer habits continue to reshape budgets.

“However, there’s every reason to be optimistic about video’s role in 2025. The rise of live events, including sports, on streaming platforms is a particularly exciting development, offering advertisers new opportunities to engage highly captivated audiences in real time. As streaming channels continue to invest heavily in premium live content, video’s ability to deliver both reach and engagement will be amplified. With advances in personalisation and cross-channel opportunities in digital advertising, marketers are well-positioned to unlock even greater value from their streaming video strategies.

Phil Acton Country Manager UK at Adform

Although the latest IPA Bellwether report has a cautious outlook, there’s a growing sense of economic relief, especially with the recent news of UK inflation slowing. Now is the ideal time for marketers to capitalise on the increased budget and make strategic investments - particularly in technologies that can minimise media waste and maximise effectiveness.

In the increasingly fragmented digital landscape, with over 100 significant identifiers now operating, advertisers need advanced solutions to cut through the complexity and maximise addressability. This includes technology that provides the transparency and control to optimise targeting, from curated deals, contextual to audience and retargeting, ensuring IDs work harmoniously across diverse platforms. This will drive broader reach, higher performance and more substantial results.

As high-growth channels like Connected TV (CTV) continue to rise, these multi-ID solutions offer a powerful tool for more efficient campaigns that maximise ROI and reduce the risk of wasted spend. By taking a proactive approach today and embracing game-changing innovation, brands can ensure they stay ahead once the market rebounds in 2025/26.