UK businesses are slashing their marketing and advertising budgets for the third quarter in a row in the sharpest downturn since the September 11 terrorist attacks in 2001, according to the latest Bellwether report.

The author of the report, which is the quarterly measure of the health of the marketing industry, said if trends from the second quarter of 2008 continued, overall UK marketing spend may fall in absolute terms.

British companies have trimmed marketing budgets set at the start of the year in the three months to June 30, due to rising costs and lower than forecast sales, according to the report, published today by ad agency trade body the Institute of Practitioners in Advertising.

Chris Williamson, Bellwether report author and chief economist at financial analyst firm Markit, said the initial budgets set at the start of the year were only modestly higher than 2007, so any subsequent cuts could lead to an absolute fall in marketing and advertising spending for the year.

"Rising costs and weaker-than-expected sales put pressure on companies to cut marketing budgets in the second quarter to protect profit margins," Williamson said.

"This raises the possibility that marketing spend could fall this year for the first time since the survey began in 2000," he added.

Internet marketing was the sole bright spot, with 19% of companies reporting a rise from the budgets set at the start of the year, and only 12% reporting a decline.

Even the growth of digital spend has slowed dramatically since the first quarter of 2008, when 27% of respondents reported an increase in their online marketing budgets since the start of the year.

However, Anthony Wreford, the deputy chairman for US marketing services company Omnicom Europe, said he expected internet marketing to rise.

"Internet spending will continue to grow as more clients see the importance of this form of communication and the ability to use this medium, like PR, in a tactical context," Wreford added.

Overall marketing budgets have been revised downwards since the start of the year, with advertising budgets suffering the sharpest downgrades, followed closely by other marketing activities such as PR, events and research.

Direct marketing budgets were revised downwards at the greatest rate in the survey's eight-year history, with the number of companies reporting a drop outnumbering those reporting an increase by two to one, according to the report.

The sectors with the sharpest falls were in travel/entertainment, retail, consumer durables and fast-moving consumer goods, while government and charities, IT and computing and the financial services sector reported upwards revisions.
The Bellwether report, which looks at how marketing budgets are revised upwards or downwards after being set at the start of the year, covers 250 companies in the top 1,000 and respondents are primarily marketing directors.

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