UK ad budgets cut at fastest rate since 9/11 -IPA

By Kate Holton

LONDON, July 14 (Reuters) - British advertising budgets have been cut for the third consecutive quarter and to the greatest extent since the Sept. 11 attacks in the U.S. in 2001, a key report showed on Monday.

The Bellwether report by the Institute of Practitioners in Advertising cited poor sales, rising costs and the growing economic gloom behind the marketing cuts.

The report is seen as a key indicator of the health of the British economy. It predicted further marketing cuts later in the year.

"Marketing budgets for the current year were revised down for the third consecutive quarter in Q2, with the rate of decline gathering to a pace not seen since budgets were hit in the immediate aftermath of the 9/11 terrorist attacks in late-2001," the report said.

"This raises the possibility that marketing spend could fall this year for the first time since the survey began in 2000," the report's author Chris Williamson said.

"Even Internet marketing was not immune, seeing the smallest increase in spend for five years."

All sectors of marketing saw budget cuts except for the Internet.

Traditional media such as television, press, radio, cinema and outdoor suffered some of the sharpest downgrades, with budgets dropping at the fastest rate since the first quarter of 2006.

"All other" marketing, such as PR and research, is likely to show growth at its weakest for at least five years.

"Direct marketing budgets were revised down to the greatest extent in survey history, and have now seen the longest period of sustained budget trimming of all categories, reflecting cost savings by converting campaigns from post to email," the report said.

Only 19 percent of respondents reported that their Internet budgets were revised up, compared with 27 percent in Q1, and 12 percent reported a decline, up from 5 percent in Q1.

Growth of Internet search slowed sharply during the second quarter, but less than total Internet advertising.

"The report certainly reflects the increasing gloom of the past few weeks," said Moray MacLennan, the IPA President and Chairman of M&C Saatchi Europe. "There is a clear implication that the economy will slow further."

Media group Trinity Mirror, which publishes the Daily Mirror newspaper, warned at the end of June that advertising market conditions had deteriorated, sending its shares sliding.

Shares in Britain's largest commercial broadcaster ITV (ITV.L) also fell last week after analysts and media buyers said they expected advertising budgets in September to be weak. (Reporting by Kate Holton, editing by Will Waterman)