UK marketing professionals have once again revised budgets upwards with the rate of growth reaching an eight year high, says the latest Bellwether report from IPA.
The Q1 2022 figures from the latest IPA Bellwether Report published today show that 24.1% of marketers have revised their marketing budgets upwards, with just 10% saying budgets had been cut. The resulting net growth is 14.1% (taken from the percentage of all companies reporting an uptick to current budgets minus those reporting a downturn) for Q1 2022.
The buoyant figure, significantly accelerated from last quarter’s 6.1%, comes as marketers look to brace their businesses for growth as they adapt to the UK Government’s strategy of living with COVID. The 14.1% net balance is the highest recorded since Q2 2014 and is the fourth successive quarter that marketers have reported budget boosts.
Joe Hayes, Senior Economist at S&P Global, said: "As the UK switches its approach from stopping COVID to living with COVID, many businesses have begun adjusting to a post-pandemic world. We've seen strong upward revisions to marketing budgets in a clear sign that companies are gearing up for growth.”
Performance marketing channels in strong growth
Events budgets were the strongest growing channel by a whisker last quarter with a net uplift of 18.7%, a significant shift from the 3.9% decline last quarter, as confidence bounced back within businesses to organise and offer large-scale gatherings in the wake of lifted restrictions in the UK.
Strong growth was reported for spend in video (+9%), other online (+18.6%) and published brands (+1.3%), driving an overall growth of 9.4% for main media. Elsewhere, out-of-home and audio continued to decline at a net rate of 4.6% and 8.5% respectively. Market research – last quarter’s top performing category – also saw a decline in Q1 2022, of 3.5%.
Justine O’Neill, Senior Director, Analytic Partners said: “With marketing budget growth at an eight year high, there is a welcomed return of optimism amongst marketers, despite a continued nervousness about cost of living crises, supply chain issues, media inflation, new variants of COVID and the ongoing war in Ukraine.
“But while more budget is an important driver of business impact, brands still need to make sure to spend it effectively. Video is a proven multiplier in media campaigns. In fact, video advertising has 2x the half-life and 160% higher impacts in weeks after delivery vs non-video content. So, the strong growth in spend on video, alongside audio, online, on television and on radio – its highest for almost five years - will continue to boost effectiveness.”
Marketing budget outlook optimistic
IPA Bellwether’s panel of marketers reported strong optimism for marketing budgets in 2022/23, with 43.8% anticipating growth, compared to just 10.6% expecting budget cuts. All marketing channels are set for expansion, according to the latest findings, led by events (+22.1%) and main media (+20.1%).
However, 2022 and 2023 growth forecasts for ad spend have been lowered - to 3.5% in 2022 (compared to 5.2% in the previous quarter) and 1.8% next year (down from 2.5%). GDP growth forecasts have also been reverted downwards, to 2.8% in 2022 and 1.2% in 2023.
High inflation, a squeeze on household spend amid a tightening economic climate, supply chain disruptions and labour shortage are all named as “strengthening headwinds” that could affect recovery, as while post-Covid there is optimism for growth, the pandemic has brought with it other challenges that will take longer to bounce back from. Russia’s invasion of Ukraine has made the situation “more precarious”, the report said, with its accentuation of a current cost of living crisis.
"Programmatic continues to attract a growing share of advertiser’s budget”
Phil Duffield, VP UK at the Trade Desk said: ”Whilst COVID restrictions have eased, today’s Bellwether report shows that there are new issues for advertisers to contend with, from supply chain disruptions to the war in Ukraine. And with inflation set to continue climbing, potentially even into double digits, this further heightens pressure for advertisers to spend their growing budgets smartly.
“Marketers can’t afford to take their foot off the gas and leave the agility and precision born from the pandemic behind - proving ROI is just as important as it ever has been. This is why programmatic continues to attract a growing share of advertiser’s budget - it allows transparency and crystal clear measurement, so that every penny of spend can be optimised to the fullest, no matter the external circumstances.”
Hayes added: “Risks to the economic outlook have built substantially so far this year. Living costs are rising, we may see inflation get close to or even hit double digits in the coming months, and this will weigh on purchasing power. Supply chain issues are still prevalent and have been exacerbated by the war in Ukraine. Rising geopolitical tensions also create uncertainty, and it may lead to companies re-assessing their decisions until all of these risks reduce."
Employment to boost but talent remains in short supply
The IPA Bellwether report’s latest findings signals strong intentions to grow employment within organisations over the next three months. More than a third of panellists (38.3%), while just 7.1% forecast a decline in staffing levels. The net balance of +31.6% was up from Q4 2021 and one of the highest since 2016.
The report notes that the buoyant predictions comes as businesses look to capitalise on the bounceback from the pandemic, and that “it’s encouraging to see that companies still have clear intentions to hire additional staff and create the conditions for growth”. But the talent shortage remains an issue, and high competition for staff is inflating wages and adding further pressures to business costs.