Advertising budgets look set to rise

19 January 2010

The amount that businesses spend on advertising will increase this year as the economy recovers from the recession, a new study has indicated.

The latest Bellwether Report from the Institute of Practitioners in Advertising (IPA) found that UK firms cut their marketing budgets for the ninth successive quarter in the final three months of last year.

However, the rate of decline was the slowest since the recession began to bite.

According to the report, a quarter of those firms polled said that advertising spend had fallen during the period but 18 per cent said that their marketing expenditure had gone up.

The balance of -7 signals a distinct improvement on the -15 registered in the previous quarter. It was also the highest since the first three months of 2008 and much higher than the record lows seen in late 2008 and early 2009.

Optimism among those firms surveyed was similarly stronger. Asked about the financial outlooks for their industries, 35 per cent reported themselves more confident as opposed to the 22 per cent who were pessimistic.

Budgets allocated for advertising and marketing in 2010 are above those set in 2009.

A significant proportion of the increase in spend has been fuelled by the numbers of firms that are committing more money to internet-search advertising (an 11.5 per cent rise) and other online advertising channels to market (a 10.4 per cent rise).

However, non-electronic media have also benefited from the return to confidence. Direct marketing budgets this year are looking at a boost for the first time since 2007.

Chris Williamson, chief economist at Markit and author of the report, said: “With budgets being set higher for next year as confidence among marketing executives about financial prospects continued to improve, the Bellwether adds further confirmation that the UK economy has pulled out of recession.”

But Mr Williamson added a note of caution: “Companies clearly remain cautious about increasing spending in an uncertain economic environment, however, as the setting of marketing budgets remains far less buoyant than prior to the financial crisis.”