U.K. Marketers Plan to Boost Budgets Ahead of Brexit Moves

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Emily James
Emily James Credit: Phil Rudge
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U.K. marketers are increasing their budgets as they prepare for the impact of Brexit next year, according to a new report from the Institute of Practitioners in Advertising, the U.K.'s agency association.

According to the Bellwether Report, 26.3% of marketers surveyed during the third quarter of 2016 said they will increase their spending next year. Just 12.9% reduced their forecasts, while the rest remained unchanged.

But while overall marketing budgets went up, financial confidence seems to be going down. In a reflection of the uncertainty over the U.K.'s future outside of Europe, 27.7% declared themselves pessimistic about the outlook for their industries, against just 15.5% who maintain an optimistic position.

The IPA's Bellwether report tracks the budget plans of 300 of the U.K.'s top marketers, asking them whether they are increasing or reducing their spending forecasts for the coming year, as well as soliciting their opinions on the overall economic outlook for their industries.

U.K. Prime Minister Teresa May announced last week that the two-year process of quitting the European Union will begin in March 2017. The value of the British pound plummeted in response, but the U.K. economy has remained stable.

Emily James, chief strategy officer at London agency RKCR/Y&R, said, "We must remember that half the nation is positive [about Brexit], but it's true that most businesses are expecting challenging times ahead. The fallout from Brexit has so far been more positive than expected – there has even been a slight upturn – but we have to remember that we've not Brexited yet."

Paul Smith
Paul Smith Credit: IPA

Paul Smith, senior economist at IHS Markit, is the author of the IPA's quarterly Bellwether Report that polls marketers about their future spending plans. He said, "The reasons for the upward revisions aren't all positive. There's a defensive element where brands want to protect their market share."

For specific budget lines, marketers surveyed said that next year they'll spend nearly 10% more on events and online marketing, and 5% more on direct marketing. Budgets for above-the-line advertising and sales promotions, however, will be cut by around 4%.

Ms. James said, "Increased spend in digital is something we absolutely see – clients want to invest their money where they are more confident of delivering a return. And events can galvanize a company to make sure that everyone is aligned around the same purpose, so they can go in with greater strength."

Respondents to the IPA Bellwether Report were also asked to comment on the potential opportunities and threats to their businesses over the coming year, as the realities of Brexit become clearer.

One media owner replied, "A short-term benefit from the fall in sterling is that U.K. businesses are more price competitive with overseas rivals – most notably in Europe."

On the other hand, there are many challenges to face. The prospects of "Brexit uncertainty and potential [economic] depression" were dreaded by one respondent, while the fall in sterling's value also has a downside: "Purchasing costs are rising and likely to have future increases too," noted another respondent.

Marketers have said they were revising their budgets upward in every quarterly survey for the last four years, but this quarter's findings represent the sharpest increase for two years. Mr. Smith added, "The government has taken a harder line than expected, so overall I'm surprised that the revisions were up so strongly, given the environment."