Following a return to growth in the opening quarter of the year, buoyed by firms taking a more pro-active approach to offset risks to their businesses, latest Bellwether data signalled a stalling of growth, with the net balance falling from +8.7% to +0.0%.

The 20% of panel members reporting greater marketing spend was completely offset by those cutting expenditure, while the remaining 60% kept budgets unchanged since Q1.

Growing economic uncertainty, continued ambiguity over Brexit and additional risk through a change of political leadership in the UK were mentioned by firms as factors expected to challenge the business environment over the coming year.

This created hesitancy among clients and delayed decision making. Panel members also raised concerns that difficult conditions domestically were damaging consumer confidence and impacting consumption.

Businesses were also wary of headwinds from external sources, particularly spillover effects into UK markets from global trade disputes and weaker growth at key export destinations such as Europe and Asia.

Nevertheless, marketing executives were given extra discretion over internet-based advertising in the second quarter, as signalled by a net balance of +11.5% of firms reporting budget growth (+17.2% in Q1). Within internet, search/SEO budgets also grew solidly (net balance of +9.9% from +14.2%).

Main media advertising budgets were also given a boost in the second quarter, as some firms used big ticket marketing campaigns to build brand recognition and expand customer bases. There were also suggestions that marketing was being deployed as a defensive strategy due to increased competitive pressures. Overall, a net balance of +5.6% of companies reported greater main media marketing budgets (+5.2% in Q1).

The only other Bellwether category to register growth in the second quarter was events. The net balance increased to +4.8%, from +3.4% previously, its highest since the first quarter of 2018 and corroborating with forecasts made earlier in the year that events budgets would grow over the 2019/20 financial year.

Meanwhile, available market research spend was reduced for a sixteenth successive quarter (net balance of -2.9% from -4.2%), while PR budgets were also cut (net balance of -5.2% from +0.0%). A second successive downward revision to sales promotion budgets was also recorded (-7.1% from -3.7%). Aside from the ‘other’ advertising category (net balance of -12.8% from -5.4%), it was direct marketing which was the worst performer, with the net balance falling to -9.0% (-3.5% previously), the lowest level in over ten years.

Panel members remained negative regarding financial prospects in the second quarter, casting more downbeat assessments towards both industry-wide and company-own finances than seen during the opening quarter of 2019.

With precisely 34% of marketing executives reporting a pessimistic outlook towards finances in their industry, compared to approximately 8% that were optimistic, the resulting net balance (-25.6%) signalled the second-most negative assessment since the fourth quarter of 2011 (surpassed only by the Q4 2018 reading of -28.6%). Furthermore, this was down from a net balance of -22.6% seen in Q1.

Latest data also pointed to deeper negativity towards own-company financial prospects. The net balance fell to -9.8%, from -2.7% in the first quarter, signalling the highest degree of pessimism since Q4 2011.

Bellwether remains cautious towards 2019, expecting only a modest 1.1% annual increase in adspend over the year as a whole. Various factors underpin its reservation, namely ongoing Brexit uncertainty, but also recent developments in the UK economy, which this year so far have largely been negative. It cites there is a real possibility that the UK economy will contract in the second quarter, and the Bellwether panel comments, as well as latest Bellwether data, highlight that businesses are looking to contain costs and shield against challenging demand conditions.

Nevertheless, Bellwether believes businesses will be eager to accelerate marketing efforts once uncertainty has cleared, and subsequently see 2020 onwards being more positive on the adspend front. It expects growth of 1.8% in 2020, followed by stronger rates of increase in 2021 (2.0%), 2022 (2.2%) and 2023 (3.1%).

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