CMOs Are Clinging to Their Budgets—But Only Just

The U.K. economy contracted at the end of 2022 to the tune of 0.3%, with economists predicting an inevitable recession in the coming months. Despite this downturn, the marketing industry is still growing, though modestly. According to the U.K.’s Institute of Practitioners in Advertising (IPA) quarterly Bellwether Report, marketing budgets for the final three months of 2022 saw a modest increase. The survey, which gleans responses from 1,000 of the country’s top businesses, found marketing spend to have risen by a net balance of 2.2% in Q4. This means 20.2% of marketers noted an uptick to budgets, while 18% tightened their belts. The headline figure reflected little change from Q3, when budgets increased 2.1%. 1 Week Into 2023, This New York Times’ Wellness Newsletter Added 110K Subscribers Broken down by category, main media marketing (which included TV spend during the FIFA World Cup) grew 1.1% in the final quarter of 2023, rising by 1.1% after falling 3.1% in Q3. Investment in video also buoyed overall growth, with 5% of CMOs saying they funneled more into the medium. Other online advertising, such as display, enjoyed a boost of 3% too. With global ad spend growth predictions muted for the year ahead, Joe Hayes, senior economist at predictions firm S&P Global Market Intelligence and author of the Bellwether Report, highlighted the significance of even modest growth, saying it illuminated how U.K. advertisers were planning to navigate the looming recession. “Another quarterly expansion in total marketing budgets at a time when business costs have hit multi-decade highs and consumer confidence has plunged suggests many businesses understand the importance of investing in resources that will help them get through the downturn as best as possible,” he said. Taking the rough with the smooth Despite a gloomy economic outlook for the U.K., which is lagging its G7 peers in terms of GDP growth with S&P predicting a shrink of 0.8% against a backdrop of rising inflation and cash-strapped consumers, the outlook for marketing budgets in 2023 and into 2024 was positive. Over a third (39.5%) of brand bosses expect total U.K. marketing budgets to be higher in 2023 and beyond, while only 15.3% anticipate spending cuts. This led to a strongly positive net balance of 24.2%, indicating a robust outlook among U.K. marketers. However, it wasn’t all rosy. General business sentiment among Bellwether panelists remained pessimistic during the fourth quarter of 2022, reflecting downbeat expectations for the industry in 2023 amid of high inflation, increased interest rates and low consumer confidence. In Q3, 44.2% of marketers were feeling negative about the advertising sector’s prospects. In Q4 this dropped to 33.2%, but nonetheless it was the second-most pessimistic assessment of industrywide prospects since their height of the pandemic in 2020. Harriet Durnford-Smith, CMO at marketing analytics firm Adverity, said: “With recession forecasts almost changing by the day, a confusing financial picture isn’t surprising.” She continued: “Optimistically, we could take continued budget growth—and expectations of further rises this year—as proof that marketers are determined to keep investing despite gloomy assessments of economic prospects for their own companies and sectors. But with IPA authors predicting ad spend declines, it’s likely many teams are still on track for cuts." How Marketers Are Rebalancing Ad Spend Budgets in 2023 'Defensive' marketing spend IPA director general Paul Bainsfair concurred that this quarter’s results were “welcome” in the current storm. “We can see that the companies that can are holding their nerve and continuing to invest in marketing through the downturn, with supporting anecdotal evidence from the report also revealing that a lot of companies who are concerned about losing market share to competitors have either maintained or increased their spend accordingly,” he noted. “This indicates that marketing is being used both defensively and offensively.” S&P has predicted that retrenchment will occur as companies invest in branding to weather the storm, leading ad spend to decline by a modest 0.3% in 2023. However, it’s warned of another short-term recession in 2024. Beyond 2023, S&P’s GDP growth forecasts are slightly higher than in its previous report (1.3% and 1.5% for 2025 and 2026, compared to 1.2% and 1.4% previously). As such, Bellwether predicts ad spend growing by 1.8% and 2% respectively in 2025 and 2026.