UK marketing budgets slashed for second quarter in row

For the second quarter in a row, marketers in the UK have slashed their budgets, reflecting the sharp fall in business confidence within the fraternity, pulling it down to its lowest level since the first quarter of 2009, when the economy was in deep recession.

The quarterly Bellwether survey, jointly produced by the Institute of Practitioners in Advertising (IPA) and BDO, released on Monday noted that a quarter of UK companies had slashed their budgets in the first quarter of 2011.

''The latest report reflects the unsettled nature of the economy at present and hence the figures reveal a hesitancy that is not surprising,'' said Nicola Mendelsohn, president, IPA. ''However we must remind ourselves that this downgrade is still markedly less severe than that seen throughout 2008 and 2009.''

The marketing spend on mainstream media – including TV, press and radio – saw a marginal increase, though internet advertising budgets rose sharply. The Advertising Association expects advertising spends to rise by 2.9 per cent this year. The Bellwether survey indicates that almost 40 per cent of companies have allocated higher budgets for advertising, though 22 per cent cut marketing spends.

''Although confidence is more negative than in recent times, it's not what we saw in 2008-09,'' said Alex Hamilton, an economist at Markit, who wrote the report. ''At the moment I think a lot of firms are in 'wait and see' mode. The real message from this survey was that firms are really looking to cut costs and overheads.''

According to Mendelsohn, since the report reflects the unsettled nature of the economy at present, the figures reveal a hesitancy that is not surprising. ''We must remind ourselves that this downgrade is still markedly less severe than that seen throughout 2008 and 2009 and that it is encouraging to see companies are still planning to increase their spend versus 2010 levels,'' he adds.

Andy Viner, head of media, BDO LLP, says the outlook for 2011 looks a lot more positive with more businesses planning to raise their marketing spend compared with 2010. ''The reduction in marketing budgets for the second successive quarter supports our anecdotal evidence that companies are taking a cautious approach to marketing expenditure against a backdrop of continuing economic uncertainty, subdued business confidence, cash flow pressures and mixed fiscal indicators in recent weeks,'' says Viner.