UK advertising budgets hit by COVID-19 but recovery lies ahead - survey

·2 min read
Shoppers walk past a sign advertising a sale in a shoe store in Chester, Britain

(Reuters) - British advertising budgets fell sharply in the last quarter of 2020 as companies cut costs due to the COVID-19 pandemic and Brexit, according to an IPA Bellwether report, which added the global vaccine rollout could aid a recovery in spending.

Companies have trimmed their marketing budgets to stay afloat during the COVID-19 pandemic and as Britain transitioned away from its membership with the European Union, four years after it voted to leave the bloc.

Advertising firms have also accelerated the shift to digital advertising over the last year.

The Bellwether report released on Thursday, which is based on a survey of around 300 UK-based companies, said 40.4% of the firms cut their marketing budgets, with the events budget being the most severely hit.

The impact of the virus was not as marked as earlier in 2020 but was still the main factor driving cuts to ad-spending, the report said.

Daily Mirror publisher Reach Plc said around 80% of its regional advertisers withdrew from markets when COVID-19 was at its worst, while Daily Mail and General Trust Plc said advertising in newspapers was likely to remain challenging and volatile.

The report however added that budget plans for the new fiscal year are expected to be more positive as the vaccine rollout continues and as firms adapt to post Brexit-rules.

"Firms are now looking forward to a recovery in domestic economic conditions, which will likely begin in the second half of 2021 as the UK's coronavirus vaccination programme starts to take effect," said IHS Markit economist Eliot Kerr.

"Businesses are now forecasting an increase in total marketing budgets for 2021/2022, although growth will likely be limited to certain areas."

WPP Plc, the owner of Ogilvy, Grey and GroupM agencies, was impacted by firms slashing their spending last year, but the switch to e-commerce and digital services is helping the firm recover.

(Reporting by Tanishaa Nadkar in Bengaluru; Editing by Amy Caren Daniel)