“Between Boris, Jeremy and Brexit, coupled with a dip in consumer confidence, it is perhaps no wonder that this quarter’s Bellwether shows zero growth to overall UK marketing budgets. Until a clearer political and economic path is outlined, the vast majority of companies are locked in stasis.”

In his analysis of the Q2 2019 Bellwether Report, released today, Paul Bainsfair, Director General of the Institute of Practitioners in Advertising, encapsulates the industry-wide frustration at the stalling of growth in the second quarter of this year. Prior hopes of a sustained revival in advertising spend in the second quarter were dashed by growing economic uncertainty and the continued ambiguity over Brexit.

In the first quarter of the year the Bellwether report had revealed a surprise boost to marketing spend, with a net balance of 8.7% of marketers increasing their budget. However, this positive trend has not continued to the second quarter as the net balance dipped to 0%. The 20% of panel members reporting increases in marketing spend being completely offset by those cutting expenditure, while 60% kept budgets unchanged since the first quarter.

A total of 34% of marketing executives reported a pessimistic outlook towards finances in their industry, compared to approximately 8% that were optimistic. A shift which signalled the second-most negative assessment since the fourth quarter of 2011.

The cost of a ‘wait and see’ marketing mentality

Joe Hayes, an economist at IHS Markit and author of the Bellwether Report, noted that developments in the wider economy during Q2 have shown that more intense challenges lie on the horizon for UK businesses. He explained, “Firms have subsequently adjusted to this, belt-tightening in some cases and withdrawing into a wait and see approach. Given the economic and political uncertainties that remain at large, a neutral stance towards budget setting appears fully justified.”

By sector, 17% of marketing executives reported cuts to their PR budgets, compared to 12% who registered growth. A shift that equated to a 5.2% decline in public relation spends in the second quarter. Sales promotion declined by 7.1%, while direct marketing was down 9%, compared with a 3.5% decline in the first quarter.

One bright spot was provided by internet and SEO budget, which increased 11.3%, while mobile marketing held steady with zero growth. “We see continued growth in the digital space, with panellists pointing to ongoing drives through technological improvements and social media channels. Firms also kept boosting main media marketing spend, with brand recognition and building initiatives ongoing,” added Hayes.

Overall the Bellwether remains cautious in 2019, with a 1.1% annual increase in adspend predicted across the year. Explaining the caution, the report noted, “There is a real possibility that the UK economy will contract in the second quarter, and the Bellwether panel comments, as well as latest Bellwether data, highlight that businesses are looking to contain costs and shield against challenging demand conditions.”

Growth in 2020

The Bellwether was not all gloom and doom, however, and the report predicts that businesses will accelerate marketing spend once uncertainty has cleared. It is predicting growth of 1.8% in 2020, followed by stronger rates of increase in 2021 (2%) 2022 (2.2%) and 2023 (3.1%).

As marketers adapt to uncertainty as the new normal, the report revealed the bright spots and new opportunities being identified by respondents. A glass-half full approach to marketing reflected in the respondent who noted, “The delay to Brexit has given us more time to prepare.” While another pointed out that the “continued decrease in the value of sterling makes our exports more competitive.”

A wealth of new opportunities and growth trends were also identified by respondents. These spanned the rise of self-care and plant-based diets, to continued opportunities surrounding brand building through digital and social channels.