IPA Bellwether: marketing budgets see growth spurt to kick off 2023

UK marketing budgets have kicked off 2023 with the highest rate of growth in a year, as organisations continue to support activity while the threats of economic downturn loom.

Around two-thirds of marketers taking part in the latest Bellwether report from the Institute of Practitioners in Advertising (IPA) saw no change to their marketing spend in the previous three months, while 21.2% saw their budgets expand – enough to offset the remaining that saw a cut.

The resulting net balance according to the Q1 2023 report (the percentage of marketers surveyed reporting an upward revision to current budgets minus those reporting a downturn) means that marketing budgets opened 2023 with a 8.2% growth.

The findings reflect more than a year of uninterrupted growth and the largest surge since Q2 2022, surpassing last quarter’s reported 2.2% growth. IPA noted that UK companies were showing “greater appetite for marketing activities to support their brands, despite intense cost pressures and struggling UK households”.

Despite continued uncertainty for the UK economy throughout 2023, budget prospects also remained positive. More than a third of marketers (36.6%) foresee greater marketing spend in real terms, with just 16.9% forecasting cuts to their budgets. The most bullish prospects lay in events marketing, a repetition of the previous research, with a net 14.5% of firms expecting increased events marketing budgets to grow over the year, but main media advertising (including performance channels) were only slightly behind, with a net balance of 13.5% growth.

Joe Hayes, Senior Economist at S&P Global Market Intelligence, said: "The latest Bellwether survey once again highlights the resilience of UK businesses who have endured both a pandemic and a period of plunging consumer confidence and multi-decade high inflation. Total marketing budget growth broadened out during the opening quarter, showing that more companies are tapping into their marketing resources to help them successfully navigate through economic turbulence."

Video and online marketing bolster growth in main media

Main media marketing budgets continued their upward trajectory after a downturn reported in Q3 2022, with a growth of 5.8% for Q1 2023. This was the most pronounced growth since the start of last year, and was fuelled by ‘other’ online marketing spend, which saw a net balance of registered growth of 10.5%.

There was also strong growth for video ad budgets last quarter – at a net 7.9%, though this was down from its double-digit peak in Q4 2022. Audio marketing enjoyed its first upward growth revision since Q3 2021, though this was more muted than others at 1.7%, while out-of-home and publishing continued to show downturns.

Outside of main marketing, sales promotions saw the strongest growth of all Bellwether categories (8.8% net growth), followed by the continued upward tick for events (6.3%). While direct marketing managed to return to growth after the previous quarter’s downturn, to a net 4.2%, PR budgets fell by a net 0.6% while market research was down 3.2%, though these declines were less severe than those seen three months ago.

Adspend growth forecasts in minus territory – just

IPA has further downgraded its forecast for adspend growth – to -0.9% – for 2023 despite a modest upgrade to GDP growth predictions this year (-0.2%, from -0.8% in the previous report). Despite evidence of some easing ahead, household inflation is expected to remain high, with IPA asserting that the “battle” to contain inflation will probably last throughout the year before any meaningful recovery is hopefully seen in 2024.

The decline in adspend for this year is in part due to normalising a strong rise in 2022, and 2024’s outlook has also been downgraded from a 1.2% growth in last quarter’s analysis to just 0.5%. Adspend growth is expected to be firmer in 2025 (1.6%).

Marketers’ predictions for their own company’s financial prospects have moved back into positive territory for the first time in a year – to a net balance of 7% (compared to -17.2% previously). But when it came to industry-wide prospects within their sectors, those surveyed remained downbeat, though at significantly lower levels than three months before. Just over one in 10 15.7% reported growing confidence in industry prospects against 22.8% who were pessimistic, with a net balance of -7.1% (from 33.2%).

Employment prospects grow in robustness – but still at soft levels

The increased optimism from Q4 2022 has continued into the start of 2023. The net balance of 16.7% reflects almost a third of marketers signalling an increase in employment in their business over the next three months and the best outlook for growth since Q2 last year.

That said, slightly more respondents (15.7%) than in the previous report told IPA that they were anticipating a staffing cut in their business. Rising salary demands and the continued threat of skills shortage were named as blockers for continued hiring, and prospects were still more muted than those seen in Q1 2022, when the net balance of employment growth stood at almost 32%.

Sustainability and tech top growth prospects – but cost of living remains a concern

The IPA’s research posed the question to its respondents of their views on the opportunities and threats that lay ahead in 2023 and beyond.

Sustainability and technology advancements were named as core opportunities for growth among panellists. The consideration around adopting “more” digital marketing methods would come as little surprise to performance marketing audiences, panellists were quick to signal intentions in movement into new immersive tools such as AI.

Meanwhile, “growing awareness from consumers around businesses’ carbon footprints, and the prospect of tightening government regulation to ensure coherence with climate goals, has also led companies to expand efforts on more environmentally-friendly practices,” the report noted.

The UK’s ongoing cost of living crisis remained one of the highest noted business risks. Some noted shifts in spending owing to the squeeze on consumer purses as an opportunity, but for many others, particularly those where their business relies on discretionary spending from their customers, they point to continued uncertainty and the potential for an economic downturn later in the year.

IPA noted that certain elements of political uncertainty and consumer price inflation appear to have “passed their peak” in terms of impact on business conditions. With indications that energy price surges are expected to peak lower than previously feared, and many panellists citing alleviating supply chain issues and costs, those surveyed were displaying more positivity than in previous quarters.