After the uncertainty surrounding the Autumn Budget prompted a period of restraint in the third quarter, UK businesses have begun to show signs of optimism, with marketing budgets seeing a recovery in the final quarter of 2024. According to the latest IPA Bellwether Report, over 20% of firms reported an increase in their marketing budgets in Q4, a positive shift from the previous quarter, when almost as many businesses had made cuts.
This growth, while modest, marks the 14th consecutive quarter of upward revisions to marketing spend. However, the net balance of +1.9% is the second-lowest recorded since the start of 2021, indicating a continued cautious approach towards expenditure despite the improvement. Notably, many businesses are projecting more substantial budget increases for 2025/26, even in the face of global economic uncertainties and challenges arising from the recent changes to National Insurance contributions in the Autumn Budget.
Growth Across Various Marketing Categories
A breakdown of the marketing categories in Q4 shows varying trends, with some sectors performing notably better than others. Events emerged as the standout category, with a significant increase in marketing spend, achieving a net balance of +12.3%, up from +9.9% in Q3. Public relations followed closely, with a healthy net balance of +6.8%, despite a slight dip from the previous quarter’s +11.0%. Other categories that saw positive growth included Direct marketing (+5.6%), Sales promotions (+4.1%), and Market research (+3.1%), which bounced back from a negative reading of -1.5% in Q3.
On the other hand, main media advertising experienced a decline in Q4, with a net balance of -4.3%, down from +4.3% in Q3. The decline in traditional media advertising was reflected across multiple sub-categories, with audio, out-of-home, video, and published brands all showing reductions in spend. In contrast, the ‘Other online’ segment saw modest growth (+2.2%) following a contraction in the previous quarter.
Marketing Budget Outlook for 2025/26: Optimism Despite Uncertainty
Looking ahead to the 2025/26 financial year, the survey points to a promising outlook for marketing expenditure. A net balance of +25.6% of companies anticipate increased budgets, with expectations for growth across all monitored categories.
Direct marketing is expected to see the strongest growth, with a net balance of +15.6% of firms planning to increase spend in this area. Events marketing follows closely behind, with a similarly robust outlook of +15.5%. Public relations is also set for growth, with +8.3% of firms predicting higher spend. However, the projections for main media advertising and market research are more modest, with expected net balances of +6.3% and +3.2%, respectively. Sales promotions, on the other hand, are anticipated to see the least attention, with only +1.0% of firms expecting to increase their budgets in this area.
Business Sentiment: Slightly Less Pessimistic
Despite some optimism in the marketing budgets, UK businesses remain cautious about their broader economic outlook. In contrast to the slight improvement in marketing spend, companies continue to express uncertainty about their prospects. The survey revealed a net balance of -1.2% for company sentiment, a slight uptick from the -2.2% recorded in Q3, but still indicating a general feeling of pessimism.
Industry-wide sentiment, however, is even more negative, with a net balance of -20.1% of businesses anticipating a deterioration in financial prospects at the industry level. This represents the highest degree of pessimism since Q4 2022. While some firms remain hopeful, with 14.8% expecting an improvement, the outlook for the industry as a whole remains challenging.
Ad Spend Forecasts for 2026 and Beyond
S&P Global Market Intelligence has slightly revised down its 2025 UK GDP growth forecast to 1.0%, citing the impact of expected tariffs on US imports, which could pose a challenge for UK manufacturing. Despite this reduction, ad spend growth for 2025 remains unchanged at 1.3%.
Looking further ahead, S&P Global is more optimistic about ad spend growth, forecasting an increase of 1.8% in 2026, up from the previous forecast of 1.6%. This upward revision reflects the broader economic recovery, with growth expectations of 2.0% in 2027 and 2028, which aligns with the long-term trend for ad spend growth.
In conclusion, while UK firms are still grappling with economic and geopolitical uncertainties, there is a clear sense of optimism in the marketing sector. With companies projecting growth in marketing budgets for the 2025/26 financial year, it’s evident that businesses recognise the value of investing in marketing to navigate these challenging times. The growth seen in events, direct marketing, and PR indicates a shift towards more dynamic, performance-driven strategies, even as traditional media advertising struggles to maintain momentum.
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