Is Bellwether optimism just a ‘confidence bump’ or are marketing budgets back for good?

The IPA’s quarterly industry temperature check found that just 14% of marketers had their budgets cut in Q2 but that was compared with 30% who got a boost to their spending pot. This is a net balance of 16% up from last quarter’s 9.4%, the highest level since the first quarter of 2014.

Budget growth was observed in every main media category, although events were the standout sector for a second quarter in succession having received the budget biggest boost (+17.2% from +23.1%). Advertisers will be pleased to learn that main media, such as TV and radio, returned to growth after a dip in the first quarter, growing by +3.5%, up from -0.7%.

Paul Bainsfair, IPA director general, said the report shows “real vim and vigor regarding UK companies’ marketing spend intentions.”

The 300 marketers were polled in June before the Labour Party was voted in on July 4. What is interesting, though, is that anecdotally, people felt confident the election would bring stability.

Typically, elections create uncertainty and companies often hold back budgets, but with a somewhat predictable election outcome, Joe Hayes, principal economist at S&P global market intelligence, says marketers “shrugged it off.” He believes the UK’s strong economy, falling inflation and the Bank of England’s incoming interest rate reduction helped “lift confidence, providing more fertile grounds for companies.”

Certainty was the buzzword of this quarter’s IPA Bellwether. After years of uncertainty marked by the pandemic, recession, war on the continent and an unstable government, businesses have had more headspace to plan longer-term.

Fiona Gordon, chief executive officer at Ogilvy UK, says finally “big business now has a roadmap for the next four years, which allows them to make CapEx and infrastructure decisions.”

While Gordon attributes this quarter’s growth to a new government creating a “confidence bump” and the summer of sport, she also points to the bigger picture. “Leaders are able to focus in again on what is vital for business to really drive economic growth, while also delivering on their brand promise to customers and partners - being zealous about makes them consistently distinctive.”

Looking broader than budgets, the IPA asks marketers how they feel about their own company’s financial prospects. Answers to this question were at their most positive in three years with just 15.4% of marketers expressing pessimism compared with 29% feeling optimistic.

Chief executive officer at Havas London, James Fox, puts the growth in budgets down to advertisers getting their confidence back. “Brands are starting to feel more secure in their financial prospects and are once more, evaluating their business strategy,” Fox says. “They understand that to be innovative and importantly engage and provide value for their customers, they need confident creativity.”

Interestingly, though, Fox doesn’t think the industry is “out of the woods yet.” He urges agencies to communicate that to marketers and continue to “provide value to clients intelligent ideas” no matter the economic picture.

This sentiment is matched by the IPA and analysts who were quick to remind the industry that the cost of living is still high, and people are still struggling financially.

“While we welcome this positivity, it is worth noting that while inflation levels have come down, this hasn’t yet translated into prices, and as such strains on many household finances prevail,” Bainsfair said in the report. The UK inflation rate is on track to hit the Bank of England’s 2% a significant improvement from the start of 2024 when it was at 5.1%.

Nick Graham, a senior consultant at the media and marketing agency Kepler, points to a recent ONS survey that found UK adults reported an 8 percentage point cost of living increase from Q1 to Q2 2024. In light of this data, Graham says: “Sustainable, long-term growth in the category appears to be a certainty, although whether we realize the full potential of the growth outlined for the rest of the year is another question.”

Kantar Media’s chief executive officer for UK and Western Europe, Lucy Bristowe, added to this thought by urging marketers to pay particular attention to “life stage” categories, for example, parents sending kids to playschool or those renewing mortgages. “Marketers need to understand where their audience is feeling the pinch so they can design and deliver more targeted campaigns,” Bristowe says.

Looking beyond the headline figures, this quarter’s report is overall positive, but there remains cause for some caution. A fifth of marketers (20.1%) are still downbeat about the industry’s financial health, compared with a lesser 16% who are optimistic. Although this is not yet where the marketing industry needs to be, it was the least negative result (-4.1% net balance) since the first quarter of 2022.