This year, April’s showers have been tariffs, market crashes and business taxes, but even before ‘Liberation Day’, global economic instability left businesses feeling the bite. 

It comes as no surprise that the latest IPA Bellwether Report for Q1 2025 marks the first time UK marketing budgets have declined for four years.

The report paints a cautious picture with a net balance of -4.8% of UK firms cut their marketing budgets. The results are cited to be in part due to cautious consumer spending, declining sales and reduced revenue that has caused businesses to reallocate spend. 

Liberation day

While the results of the survey were pre-Trump’s Liberation Day, the threat of tariffs loomed over businesses in Q1. With fears of the implications of Rachel Reeves' budget acting in tandem with global economic uncertainty, spend decision makers were forced to brace for impact and tighten purse strings.   

“In the face of President Trump frequently overturning political and economic norms, it’s understandable that more UK businesses have adopted a cautious, ‘wait and see’ approach to marketing spend this quarter,” says Paul Bainsfair, IPA Director General. 

He continues: “Even before the introduction of US tariffs on 2nd April (thankfully now paused), the anticipation alone - combined with rising costs from National Insurance increases and the minimum wage hikes - was already influencing budget decisions.”

Just under a quarter of panel members reported a reduction in their marketing budgets (24.2%), compared to 19.4% indicating an increase.

The long and short of it

The results of the report point to a conservative spending pattern of pulled back main media activities alongside a slight uptick in performance and promotional activities. 

“We’re seeing a familiar pattern emerge in these challenging times: increased investment in short-term sales promotions and cuts to main media budgets. While these adjustments may offer immediate relief, they are not a sustainable path to long-term brand growth,” adds Bainsfair.

Main media category recorded a net balance of -6.7%, down from -4.3%, as out-of-home (-18.9%), audio (-10.8%), published brands (-8.3%), and video (-1.0%) all recorded contractions. The largest tracked category for cuts came from the ‘other’ marketing category, which encompasses any paid-for spend not specifically included in Bellwether categories; here net balance fell to a 16-quarter low of -11.7%, down from -4.2%. 

Some categories did report stable growth. Direct marketing experienced solid expansion, rising to +9.0% from +5.6%, while events (+5.4%) and PR (+3.4%) both maintained growth, albeit weaker than in previous projections. Sales promotions budgets were revised upwards again, +8.0% up from +4.1%, indicating the strongest increase in almost two years.

Sunny spells and April showers 

Despite the shaky start, the Bellwether paints a largely positive picture for the rest of the year. Optimism for increased budgets is high among Bellwether firms. Over 36% of respondents expect an increase in their total marketing budgets, roughly double the 17.8% who foresee a decrease. 

Q1 has understandably left Bellwether respondents cautious about their company’s financial outlook and of their respective industry outlook as a whole. At company level, those reporting a positive outlook fell to -12.9%, from -1.2% in Q4 2024, marking the lowest level since the closing quarter of 2022. At industry level, the net balance hit a ten-quarter low of -37.4%, down from -20.1% in the previous quarter. 

S&P Global Market Intelligence has cut its 2025 GDP growth forecast to 0.6% from 1%, but largely forecasts remain unchanged for 2025 and 2026. The impact of business tax is due to hit and high interest rates pose challenges to household spend. Yet, with Liberation Day in the rear-view mirror, the hope is that markets are set to stabilise. 

The industry weighs in on the IPA Bellwether:

In spite of considerable macroeconomic headwinds for businesses, the Bellwether survey does provide some evidence of resilience among UK marketers. While the opening quarter of 2025 saw overall marketing budgets revised downwards, surveyed executives remain optimistic about the future on balance. Over 36% anticipate an increase in their marketing spend for the 2025/26 period, reflecting businesses’ commitment to driving growth and sales through volatile trading conditions. Increased budgets for direct marketing, events and sales promotions indicates a proactive and agile approach to overcoming these challenges.

The Q1 IPA Bellwether Report reflects a cautious start to 2025, with the decline in main media advertising budgets continuing the contraction seen at the end of 2024. In NI, this trend has been echoed by media owners reporting a “slow” first quarter. The dip in market research spend, often an indicator of actual and projected campaign activity, is also notable. Encouragingly, growth in areas such as PR, direct marketing, and events provides some balance, and NI’s agencies - with their diverse offerings and agility - are well-placed to respond. The hope, however, is that this does not signal a shift toward short-termism, and that investment in main media - proven to build brands over the long term - regains momentum.

I’m not entirely surprised by the Q1 2025 IPA Bellwether Report. The headline decline in spend is something we’re experiencing across the board and the uplift in the response channels is the current natural strategy to drive activation. Diminished financial confidence underscores the need for agility and resilience. Navigating this landscape requires a keen focus on delivering demonstrable value and fostering deeper consumer connections.

Well, where to start? I’m not sure anyone knows what the future holds, and if they claim to, it’s likely to change tomorrow anyway. My worry is that there’s a large number of CFOs’ fingers hovering over the budget cut button, waiting to see how the world settles. There are however already clear signs of financial insecurity. Growth in spend on direct selling methods and declines in traditional brand and above-the-line channels suggest an immediate need to drive revenue. With nearly a third predicting lower levels of employment, putting more pressure on already stretched marketing teams, it’s not going to be an easy ride for agencies.

The latest IPA Bellwether Report gives us a clear view of the ups and downs of Q1 2025 and it's definitely shaping how we're thinking about the future. Even though marketing budgets have taken a hit, the good news is there's a predicted boost for 2025/26, which means new opportunities to jump on. PR budgets are still on the rise, showing just how important communication strategies are when the world gets unpredictable. With AI advancements and sustainability becoming increasingly important, we're looking at some really exciting innovations. We need to stay flexible, ready to embrace new technology and stay ahead as markets evolve. It's all about remaining resilient and seizing growth opportunities, regardless of what life throws our way.

The latest Bellwether Report shows that the market research sector has hit a bit of a bump this quarter, with budgets taking a noticeable dip (-10.5%). It’s a bit of a reality check after the positive growth we saw recently. Businesses seem to be tightening their belts, reallocating funds elsewhere amidst current economic uncertainty. That said, there’s a glimmer of hope as companies are still optimistic about increasing market research spending in the next financial year (+3.1%). So, while it’s a challenging moment, it looks like market research might just bounce back as businesses refocus on understanding their audiences better.

It is encouraging to observe that the events sector is defying the overall downward trend in marketing spend. The data aligns with our observations on the ground, where there is cautious optimism. We are witnessing an increased demand from clients for deeper, more meaningful engagement with their customer or audience base.

Although the UK growth figure for February exceeded expectations, we continue to face a volatile economy, with businesses remaining apprehensive about the global landscape. As indicated in the report, this uncertainty is affecting budgets. Additionally, we are still experiencing pressures related to the cost of living, which are driving up purchase costs and impacting profit margins.

It’s been quite the rollercoaster for business' and it doesn’t look like we’ll be getting off the ride soon. Some organisations hit the panic button last quarter as the tariff threat loomed, but they need to avoid making it a habit. Brand building gives businesses options – the power to hold or to even put prices up without shedding volume or denting profit margins. Amid so much uncertainty, that room for manoeuvre is invaluable. Chopping budgets might seem like the answer now but boardrooms will likely regret it down the line. It takes time to build strong, meaningfully different brands and right now, firms in a weaker position don’t have a minute to waste.