Growth in UK firms' marketing budgets slowest since start of 2016

(Reuters) - British businesses’ marketing budgets rose at the slowest pace since the start of 2016 in the first quarter as challenging market conditions continued to put pressure on companies, an industry survey showed on Wednesday.

Britain's Piccadilly Circus billboard lights are illuminated following their switching off in January for renovation, London, Britain October 26, 2017. REUTERS/Peter Nicholls

The IPA Bellwether report, conducted by IHS Markit, showed that 22.9 percent of companies increased their marketing budgets in the quarter, compared with 17.9 percent of firms that recorded a fall.

The resulting net rise of 5 percent compares with an increase of 8.6 percent increase in the previous quarter and marks the lowest recorded by the survey for two years.

“Rising costs and the ongoing uncertainty that exists over the future direction of the UK economy in a post Brexit world have led to caution and belt-tightening across a number of sectors, especially those more exposed to retail and consumption,” Paul Smith, Director at IHS Markit said.

Around 300 UK marketing professionals, primarily from Britain’s top 1,000 companies and across all key business sectors, were interviewed for the survey conducted by IHS Markit on behalf of the Institute of Practitioners in Advertising.

Internet marketing was the only bright spot in the advertising realm, with marketing spend rising 8.7 percent.

The survey also showed that companies continued to step-up their adoption of internet advertising encouraged by positive returns from previous digital marketing campaigns.

But mainstream media advertising, which includes campaigns related to TV, radio and cinema, slipped into negative territory during the quarter.

The migration of advertising online has hit advertising companies such as WPP WPP.L, which has been affected by a downturn in spending by big consumer goods groups and the loss of some major accounts.

The report forecast a “muted” 0.8 percent rise in advertising spending in 2018 as Brexit-related uncertainties and ongoing pressure on household finances continue to strain consumption.

The Bellwether survey forecast that growth in advertising spend would slow to 0.4 percent in 2019.

Reporting by Radhika Rukmangadhan in Bengaluru. Editing by Jane Merriman