UK companies raised their marketing budgets again in the second quarter, to the second highest level in two years. Over exactly the same three months, the executives making those decisions became markedly gloomier about their own companies and considerably gloomier about their industries.
Both findings come from the IPA Bellwether Report published on 16 July, which surveys UK marketing executives on what they are actually doing with their budgets rather than what they expect the economy to do. The gap between the two halves of this quarter’s report is the interesting part.
What the number actually says
Some 23.8% of firms reported an increase in marketing spend, against 16.9% who recorded cuts. About 59.4% left budgets unchanged. That produces a net balance of +6.9%, slightly below the +7.3% recorded in the first quarter.
It is worth being precise about what that figure is, because it is routinely misread. The net balance is the share of companies increasing spend minus the share cutting it. It is not a percentage change in the amount of money spent. A net balance of +6.9% does not mean budgets rose 6.9%; it means that for every hundred firms surveyed, about seven more raised budgets than lowered them.
What makes it meaningful is the comparison against history rather than the absolute size. The IPA describes this as a historically strong expansion, and it is the second highest reading in two years. Roughly six in ten firms changed nothing at all, which is the usual pattern: budgets are sticky, and the survey measures the direction of the minority who move.
Why six in ten budgets never moved
The 59.4% who changed nothing are the least discussed and most informative group in the survey.
Marketing budgets in most companies are set once a year, during an annual planning cycle that fixes a number months before it is spent. What the Bellwether captures is not that plan but the in-year revisions to it: the decisions to release more money than was allocated, or to claw some back. A firm reporting no change has not made a fresh judgement about advertising this quarter. It is executing a decision taken last autumn.
That has two consequences for reading the report. The first is that sentiment shows up in the data slowly. Confidence deteriorated sharply this quarter, but most of that pessimism cannot express itself as a budget cut until the next planning round, which means the effect of a bad Q2 mood is more likely to appear in next year’s allocations than in this quarter’s spend. The divergence between the two halves of the report may partly be a timing artefact rather than a genuine change in behaviour.
The second is that the firms who did move are the informative ones. A mid-year upward revision requires somebody to go back and ask for money that was not in the plan, and to win that argument against a finance function that has just watched its own forecasts worsen. Roughly a quarter of the panel did that. In a quarter when a third of respondents felt worse about their own prospects, that is a more meaningful signal than the headline balance suggests.
It also means the reading is unlikely to be inflated by inertia. The unchanged majority is neutral by construction.
Confidence fell off a cliff
The sentiment half of the survey went the other way, and not by a small margin.
The net balance of respondents expecting better financial prospects at their own business fell to -9.6%, from +0.6% in the previous quarter. Underneath, 32.3% felt less upbeat than they had three months earlier, against 22.8% who were more optimistic.
The industry-level reading is worse. After improving to a five-quarter high of -21.0% in the first quarter, the net balance of firms anticipating better conditions across their industry fell to -25.1%. Some 36.5% expect a deterioration, more than three times the 11.4% who expect improvement.
So the same population of executives simultaneously reported that they were spending more and that they expected things to get worse. That is not a contradiction, but it is a specific behaviour worth naming. Historically, marketing is one of the first budgets cut when a firm turns defensive, because it is discretionary and its returns are hard to attribute in-year. Spending up while forecasting down suggests the reflex has changed.
Paul Bainsfair, Director General of the IPA, read it as recognition of what advertising does: “The overriding message from this quarter’s report is that UK companies continue to recognise the value of advertising.”
The more cautious reading is that firms expecting a harder market are buying share of voice precisely because the market is getting harder. Both readings point the same way.
Events and video took the money
Events led every category again, with a net balance of +11.0%, though down from +14.7% in the first quarter. Direct marketing followed at +3.0%.
Main media advertising and PR both grew, at +1.5% and +1.4%, but those are sharp decelerations: main media was +4.5% and PR was +6.0% three months earlier. The headline total held up while its two largest conventional components slowed considerably.
Within main media, the breakdown is where the strategy shows. Of the five tracked sub-segments, video was the only one to grow, and it grew well: the net balance rose from +5.7% to +8.2%, a seven-quarter high. Published brands recorded the sharpest contraction at -8.3%, effectively unchanged from -8.5%.
Events and video are both brand-building formats rather than direct-response ones. Their strength alongside falling confidence supports the interpretation that firms are investing in long-term brand position rather than chasing short-term conversions, which is the opposite of the standard recession playbook.
Audio stopped falling after three years
The single most striking line in the report is easy to miss. Audio budgets recorded a net balance of exactly 0.0%, which the IPA notes follows twelve consecutive quarters of decline.
Twelve quarters is three full years of continuous contraction. A reading of zero is not a recovery, and one quarter does not establish a trend. But the end of a three-year decline is a genuine inflection point for radio, podcasting and streaming audio, and it is the kind of turn that only becomes visible in retrospect if nobody flags it at the time.
Out of home also improved markedly without turning positive, with the net balance rising from -11.3% to -2.5%. Two of the oldest advertising channels in the market therefore both stopped deteriorating in the same quarter.
Online advertising was cut for the first time in seven quarters
Against that, the category described as “other online” was cut for the first time in seven quarters. Its net balance fell to -5.1%, reversing the +5.7% recorded in the first quarter, making it the second-biggest drag on main media spending after published brands.
An eleven-point swing in one quarter, in the category that has absorbed most of the sector’s growth for a decade, is not a rounding error. It sits oddly beside the wider ad spend data, where search alone took £4.6bn of UK ad spend in three months, and the likeliest explanation is compositional: budget consolidating into search, video and retail media while the residual online categories lose out.
Market research, meanwhile, remained in contraction at -4.1%, though that is an improvement on the -8.5% recorded in the first quarter. The catch-all “other” category weakened further to -10.8%.
Spending is forecast to outgrow the economy
S&P Global Market Intelligence, which produces the report with the IPA, forecasts UK GDP growth of 0.6% in 2026, marginally up from a previous 0.5%. Its 2027 forecast was cut hard, to 0.8% from 1.4%, on higher energy prices, weaker real incomes and tighter financial conditions.
Adspend is expected to grow faster than the economy that funds it: 2.1% in 2026, then 2.3% and 2.4% in 2027 and 2028, in real terms despite inflation.
Advertising growing at roughly three times GDP is not a normal relationship, and it only holds if firms keep treating marketing as investment while their confidence deteriorates. This is the same shape found across the rest of this quarter’s data, where headline growth keeps turning out to be narrowly held once it is broken apart.
The Bellwether’s own two halves are the clearest example yet. What companies are doing and what they expect have come apart, and only one of them can be right for long.
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