UK Advertising Spends in 2024: Key Trends from IPA Bellwether Report Q1

UK companies revised their marketing spend up once again in Q1 2024, stretching a run of growth that dates back to the second quarter of 2021, according to the latest IPA Bellwether Report published today (18 April 2024). A sustained upturn in marketing spend comes amid an improving economic backdrop for the UK economy, with an impending emergence from recession and falling inflationary pressures.

Just shy of one-quarter (24.4%) of panellists recorded an upward revision to their overall marketing budgets in Q1, compared to 15% that saw a contraction. Although this led the net balance to fall to +9.4%, from +14.7% in Q4 2023, it was nevertheless the second highest in almost two years and pointed to a solid quarterly expansion.

Growth by category in Q1 2024

Events was the stand-out Bellwether category, recording a series-record expansion (net balance at +23.1%, from +15.9%) as companies continued to show a strong appetite for face-to-face engagement with customers. Direct marketing (+7.0%, from +12.6%) also extended its growth sequence, albeit with the upturn cooling slightly from its previous multi-year high. Sales promotions budget growth (+4.9%, from +1.4%) gathered further momentum in the opening quarter of 2024, while expansions of a marginal nature were seen in market research (+1.4%, from -5.0%) and PR (+0.6%, from +1.9%).

Marketing budget declines were limited to just two categories in Q1, although one of which was the crucial main media segment (-0.7%, from +1.9%), signalling some caution towards big-ticket advertising campaigns. According to more granular data on main media, the contraction was driven by out of home (-10.8%, from -8.1%), published brands (-5.7%, from -1.4%) and audio (-4.5%, from -7.0%). This slightly offset growth in other online (+7.1%, from +13.2%) and video (+0.8%, from +6.6%). Other marketing activity not already accounted for also saw budgets shrink in the first quarter (-4.3%, from -6.4%).

Budget Plans 2024/25

Finalised budget setting plans for the 2024/25 financial year were strongly positive, in line with preliminary estimates, latest Bellwether survey data showed. Just over four-tenths (40.7%) of the survey panel have lifted the total amount available for marketing, compared to 18% reporting cuts. The resulting net balance of +22.8% signalled strong budget setting for 2024/25.

The main area of marketing budget growth for 2024/25 is set to be events, with a robust net balance of +18.7% of survey respondents anticipating an uplift in spend compared to the previous financial year. This strongly outperformed the next-best category, direct marketing, which boasted a respectable positive net balance of +11.9%. Main media advertising is also poised for budget expansion in 2024/25, with a net balance of +10.1% planning to lift available expenditure in this segment. PR (+6.3%) and sales promotions (+6.0%) were the last two monitored marketing categories in positive territory for 2024/25.

That said, companies were still wary of cost-savings where possible, with spending in some areas of marketing expected to be withdrawn as a result. Market research (net balance of -4.4%) and the other category (-3.4%) are set to contract.

Businesses remain optimistic towards their own companies’ prospects

The latest Bellwether data indicated a much-reduced level of pessimism towards industry-wide financial prospects, reflecting strengthening business conditions across the UK economy more broadly. In Q1, just shy of one-fifth (19.5%) of survey respondents were more optimistic towards their industry’s outlook than they were in the previous quarter. This was only narrowly cancelled out by 24.9% of firms expressing stronger negativity, yielding a net balance of -5.4% (up from -12.7%). Nevertheless, this was the highest seen for two years.

Regarding their own companies, Bellwether firms remained optimistic in the opening quarter. At +9.7%, the net balance of companies that were more upbeat towards financial prospects was strong (albeit slightly weaker than +12.6% previously). While nearly one-fifth (19.5%) were downbeat, 29.2% were positive with their near-term company-own assessment.

Adspend to bounce back in 2025

Since the last Bellwether Report, a slew of positive and improving business survey data indicate that the UK recession will be short-lived, with growth expected to be confirmed by first quarter GDP data. S&P Global Market Intelligence have subsequently revised their forecast for UK GDP in 2024, expecting growth (0.2%), rather than a small contraction (-0.1% previously estimated).

Still, with interest rate cuts not expected until June at the earliest, and consumer confidence surveys remaining weak, there are obvious challenges at large for the UK economy which could weigh on businesses’ propensity to spend, with margin compression coming in the form of still-elevated costs, strong wage pressures and supply-chain issues. As such, the Bellwether forecast for adspend to decline in real terms remains little-changed at -0.5% for 2024 (vs. -0.7% previously).

However, from 2025 onwards, tailwinds from lower inflation and borrowing costs should support household real incomes, driving the UK economy and adspend into more robust expansion territory. Bellwether adspend growth forecasts improve to 1.2% for 2025 and 1.9% in both 2026 and 2027.

In a significant development, UK companies have increased their marketing budgets yet again in the first quarter of 2024, marking a consistent upward trend that began in mid-2021. This news, stemming from the latest findings of the IPA Bellwether Report released on 18 April 2024, highlights a resilient marketing sector buoyed by an improving economic climate. As the UK economy shows signs of recovery from its recent recession and experiences a drop in inflation pressures, businesses appear more willing to invest in marketing efforts.

Detailed Overview of Marketing Spend in Q1 2024

In an encouraging sign for the marketing industry, nearly a quarter (24.4%) of surveyed firms reported increased budget allocations to marketing in Q1, although there was a reduction in the number of firms cutting their marketing budgets to 15%. This adjustment brought the net balance to +9.4%, a slight decrease from the +14.7% observed in Q4 2023 but still representing robust quarterly growth.

Category-Wise Growth in Q1 2024

• Events: The sector witnessed a historic increase, with a net balance of +23.1%, up from +15.9%, underscoring a continued preference for direct customer engagement.
• Direct Marketing: While still on the rise at +7.0%, the growth rate moderated from the peak of +12.6% seen in previous quarters.
• Sales Promotions: This category experienced increased momentum, registering a growth of +4.9%, a notable jump from +1.4%.
• Market Research and PR: Both categories saw modest gains, with market research rebounding to +1.4% from a previous decline, and PR ticking up slightly to +0.6%.

Conversely, reductions were noted in two key areas, notably the main media segment which dipped to -0.7%, signaling a cautious stance towards larger advertising campaigns. This contraction was primarily led by decreases in out-of-home advertising, published brands, and audio media.

Looking Ahead: 2024/25 Budget Projections

Looking forward, the 2024/25 fiscal year appears promising according to the latest Bellwether survey data. Over 40% of respondents have increased their marketing budgets, reflecting a net balance of +22.8% who are optimistic about spending more in the coming year.

• Events: Continues to lead with a significant projected increase in budget allocation.
• Direct Marketing and Main Media Advertising: Both are set to see substantial budget growth.
• PR and Sales Promotions: Although smaller in scale, these areas are also expected to see budget increases.

Economic and Industry Outlook

Despite ongoing challenges such as high costs and supply chain disruptions, there is a reduced level of pessimism in the industry, with a notable improvement in the financial outlook across UK businesses. The Bellwether report suggests a rebound in ad spending starting from 2025, driven by lower inflation and more favorable borrowing conditions which are expected to bolster household incomes and, consequently, overall economic activity.

Conclusion

As the UK navigates past economic turbulence, the sustained increase in marketing spend is a positive indicator of business confidence and the pivotal role of strategic marketing in driving growth. Companies remain cautiously optimistic, strategically planning their budgets to leverage upcoming opportunities while managing operational costs.

With insights like these, marketing professionals and business leaders can better understand the dynamics of market spend and make informed decisions to optimize their marketing strategies in alignment with broader economic trends.

Further details of the media advertising spends in 2024 Q1 can be accessed directly from the IPA webite