January 12, 2009 / 10:25 AM / 11 years ago

UK advertising budgets cut at record rates -report

LONDON, Jan 12 (Reuters) - British marketing budgets were revised sharply lower in the fourth quarter, a key industry report showed on Monday, at the sharpest rate since it began charting the sector, with further weakness expected in 2009.

The Bellwether Report, by the Institute of Practitioners in Advertising (IPA), said companies had cut back on spending after seeing their financial prospects deteriorate at a record pace.

“Some 75 percent considered that financial prospects facing their industries had deteriorated compared to three months ago,” the report said. “Just 4 percent saw an improvement.”

Hardest hit in the fourth quarter were main media advertising and “all other” which includes public relations, events sponsorship and market research. Internet advertising, which has grown rapidly in recent years, suffered a record reduction in spend although the rate of decline was the weakest of all the categories surveyed.

The report said provisional data on initial budget setting for 2009 indicated that new budgets had been set lower on average compared to actual spend in 2008, the first time that initial budgets have been set lower than the previous year.

The report said Bellwether data and GDP have historically moved closely in line, meaning GDP is likely to have contracted for a second consecutive quarter in Q4 of last year, with the rate of decline gathering pace.

“This points to a deepening of the recession, which bodes ill for advertising expenditure in the coming year,” it said.

The report’s author, Chris Williamson, said the data showed an alarming rate of corporate retrenchment.

“Disappointing sales in all sectors have also led companies to cut budgets for the year ahead for the first time since the survey began, suggesting there will be no quick return to growth for marketing spend,” he said.

Reporting by Kate Holton; editing by Simon Jessop

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