- Marketing budgets slashed to lowest level in 20 year history of IPA Bellwether Report
- Predicts -11.3 fall for whole of 2020
- Events marketing sees sharpest reduction
An unprecedented fall in UK marketing budgets as a result of the Covid-19 pandemic has been laid bare in the IPA Bellwether Report for the second quarter of 2020.
The Institute of Practitioners in Advertising (IPA) said that marketing budgets were slashed to their lowest levels in the twenty-year history of its Bellwether Report, which collects data from a panel of around 300 UK marketing professionals from the UK’s top 1000 firms each quarter.
The net balance of firms that cut marketing budgets fell to -50.7% in Q2, down from -6.1% in Q1. Almost 64% of panel members registered a decrease in spending compared to the first quarter, while only 13% posted an increase.
These figures supersede the Report’s previous nadir of -41.7% in Q4 2008, following the global financial crisis.
The IPA said that many businesses, in particular service sector companies, focused on cutting costs amid severe declines in revenue caused by the pandemic.
Funding for events marketing saw the sharpest reduction in the second quarter, due to coronavirus restrictions prohibiting anything other than small gatherings. A net balance of -76.6% of panelists registered a decline in events budgets, with more than 80% reporting a decrease. Just 3.6% posted a rise.
Main media advertising also reported a steep decline in Q2. The IPA said the reduction in budgets was the most severe since the survey’s inception, with a net balance of -51.1% of marketing executives seeing a decline in available spend.
The worst performing sub-category was out of home advertising (-61.2%). This was followed by audio (-50.0%), published brands (-49.2%), video (-39.3%) and other online (-35.1%).
Direct marketing and public relations saw the joint-softest budget cuts in the second quarter, although with net balances of -41.6%, the downturns were still severe overall.
Meanwhile, market research (-42.2%), sales promotions (-51.2%) and other marketing expenditure (-59.2%) each saw historic reductions.
Bellwether author IHS Markit also anticipates steep contractions in GDP for 2020, with a -11.9% decline for the year as a whole.
The Bellwether Report also predicts -11.3% reduction in ad spend during 2020, although it says this figure is heavily dependent on most sectors in the UK economy remaining open for the rest of the year, with a second wave of coronavirus infections a significant downside risk.
Looking forward, IHS Markit anticipates a “robust recovery in macroeconomic conditions during 2021” as businesses move closer to operating at full capacity.
This would translate into a predicted +4.9% expansion in GDP and ad spend growth of +6.0%. Beyond that, it expects the economy to achieve above-average growth during a further recovery phase, before stabilising near long-run rates in 2024 and 2025.
Paul Bainsfair, IPA Director General said: “As we suspected, these Q2 Bellwether figures reveal the very grave impact of COVID-19 on UK companies’ marketing budgets, financial prospects and employment plans.”
“Understandably companies in the most severely disrupted sectors have had few options but to preserve cash and operations to survive until trading conditions are more benign. We can only hope that the range of Government aid – from VAT cuts to the Eat Out scheme, in addition to the furlough scheme and more, can help to facilitate this.