Rate of UK ad budget cutting eased in Q2-report

LONDON, July 13 (Reuters) - The rate that British companies cut their advertising spend eased in the second quarter of 2009, raising hopes that the recession may have peaked in the first quarter, a new report said on Monday.

The Bellwether survey by the Institute of Practitioners in Advertising said the rate of decline eased for the second quarter in a row.

One in three companies also reported that their financial prospects had improved during the period.

But despite the signs of optimism, the report, compiled by Markit, said that the rate of decline still remained severe, with only 10 percent of companies revising up their 2009 budgets, compared with 38 percent which reported a reduction.

With 2009 budgets having been set lower than 2008 at the start of the year, the second quarter downward revision raises the risk that marketing spend will fall in 2009 even more than in 2008 -- the first annual fall in the survey's history.

"To anyone optimistically inclined, the April Bellwether seemed to signal the bottom of the market, and the new report suggests that the worst is over," said Rory Sutherland, the IPA President and Vice Chairman of Ogilvy Group UK.

"Budget cutting for all marketing communications categories seems to be slowing and, while the economy is still tough, the balance of executives reporting improved prospects moved into positive territory for the first time since Q1 2008."

Spending in advertising was reduced for all categories of marketing in the second quarter, with main media advertising and 'all other' which includes public relations, event sponsorship and market research being the hardest hit.

Chris Williamson, the chief economist at Markit, said the improvement was welcome but said the pressure on companies to control costs clearly remained intense, suggesting any recovery in GDP and marketing spend would be fragile. (Reporting by Kate Holton; Editing by David Cowell)