Marketers warned of spending cuts

The first fears that big business may flinch in wake of the global credit squeeze by trimming their budgets for marketing surfaced yesterday.

The UK’s Bellweather report, the quarterly index of marketing sentiment, suggested that financial turmoil or a cyclical peak in spending could result in cuts for marketers.

Sir Martin Sorrell, chief executive of WPP, the global marketing group, said it was “too early to call” the impact of credit conditions on marketing or advertising budgets.

But Chris Williamson, author of the report, said the current climate of scaling up marketing budgets, for the third quarter in a row, means “it is likely” the industry has reached a peak.

In the report, which polled 250 UK companies, reductions on marketing budgets from financial respondents were only limited, The Financial Times reported.

But they were in stark contrast to budget rises in all other industries, revealing that marketing spend for the rest of 2007 is to see the strongest growth in the survey’s history.

Spending on mainstream media was revised up to the greatest extent in the survey’s history, with a net balance of 9.2%, while above-average growth was allocated for internet budgets.

All other marketing activities, including PR and events sponsorship, also saw record rises in the third quarter this year, driven by strong sales revenues and business expansion.

Yet there was a cautionary note going forward: Mr Williamson reportedly believes the effects of the credit squeeze are likely to appear as a hit to profits, via higher borrowing costs and weakening demand.

He said: “There is undoubtedly going to be weakening of profits in the second half [of this year]. Financial services respondents are already attributing budget cuts to the credit crunch.”

Moray MacLennan, president of the IPA, which produced the report, said the industry’s growth remained strong and appears to be unaffected by the upheaval in financial markets.

But he stressed that the results from the next report charting marketing spend during the fourth quarter would be the “key” to revealing how far recent “economic news” has affected marketing budgets.

 

16th October 2007

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