Bellwether downgrades ad forecast with market research taking big hit

Adspend forecasts were revised to -0.2% for 2016 and -1.3% for 2017. This is first time since 2013 that Bellwether has predicted a fall in adspend. It had previously predicted 3.3% and 2.7% growth for 2016 and 2017 respectively.

While events, internet and main media advertising were the main beneficiaries of the upwards revisions to marketing budgets, it was market research (-4.3%), sales promotion (-4.3%) and direct marketing (-0.5%) where the spending reduction was focused.

The report showed a net balance of 10.7% of companies registering an increase to their budgets during Q2 2016 – up from 3% in Q1 and the highest reading for a year. The net balance is calculated by subtracting the percentage recording a downward revision from the percentage recording an upward revision.

However the survey pointed to signs of uncertainty, even though the vast majority of respondents submitted their results before the Referendum vote was announced. A record 68% of marketers signalled a freezing of their budgets over the quarter.

There was increasing pessimism with sentiment around the industry’s financial prospects dropping to the lowest level in 13 quarters, from -6.5% in Q1 to -8.1% in Q2.

Paul Bainsfair, IPA director general, said: “While the uncertainty in the economy caused by the vote to leave Europe continues to linger, we will experience an inevitable period of flux.

“Before companies react and cut marketing spend, however, it is worth remembering that all the evidence points to the opposite.  Companies that keep investing during a downturn perform better financially than those that reduce marketing expenditure.”