Advertisers rein in spending as slowdown fears resurface

Worries about a renewed economic slowdown are already hitting the advertising industry, an influential survey warned yesterday, with 20 per cent of marketing managers deciding to trim their budgets during the second three months of the year.

The quarterly Bellwether survey, published by the Institute of Practitioners in Advertising (IPA) and the accountancy firm BDO, shows media budgets were tightened in the second quarter, with 20 per cent of the 300 company advertising executives questioned cutting their spending, against 15 per cent reporting an increase.

The report also found that overall business confidence has dipped, indicating that companies are concerned about the effect of the massive public-spending cuts that the Government is set to implement. The findings will disappoint those who had hoped the worst was over for the advertising industry. The second-quarter findings mark a reversal of the results in the first three months of the year, when more companies increased their spending than cut it for the first quarter since 2007.

Despite the gloomy overall numbers, spending was up on direct sales and on online advertising, yet the rate of growth of online budgets was at its slowest for nine months. For more traditional media, such as newspapers, spending continued to slide, but the survey did find that overall spending will be higher in 2010 than last year.

"That we are seeing a more cautious approach to marketing spend compared to the first quarter is not surprising due to the uncertain nature of our economy at the moment, and in the wake of the recent Budget," said Rory Sutherland, the president of the IPA. "However, though this indicates a less optimistic picture than previously thought for this year, marketing spend is still set to increase."