In the first quarter of 2025, UK companies revised their total marketing budgets down amid heightened geopolitical tensions, marking the first overall decline in four years.
According to the Q1 IPA Bellwether report, a net balance of -4.8% of firms cut their marketing budgets. Just under a quarter (24.2%) of businesses reduced their marketing budgets, compared to 19.4% who revised them upwards.
This is a shift from the previous quarter, which recorded growth with a net balance of 1.9% of businesses revising budgets upwards.
“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,” explains IPA director general, Paul Bainsfair.
Sales promotions budgets were revised upwards with a net balance of 8%, up from 4.1%, indicating the strongest increase in almost two years and signalling marketers are choosing to rely on short-term tactics in times of uncertainty.
The Q1 Bellwether report covers the period from 1 January to 31 March, therefore narrowly missing the introduction of US tariffs on 2 April.
However, the anticipation of tariffs, combined with rising costs from National Insurance increases and minimum wage hikes, was already influencing budget decisions, according to Bainsfair.
“We’re seeing a familiar pattern emerge in these challenging times: increased investment in short-term sales promotions and cuts to main media budgets,” he says. “While these adjustments may offer immediate relief, they are not a sustainable path to long-term brand growth.”
Despite the decline, there is a more positive outlook for the rest of the 2025/26 financial year, with a net balance of 18.4% of marketers expecting an increase in their total marketing budgets. The biggest increases are expected in events and direct marketing.
This quarter, however, revealed the most significant drop came from the “other” marketing category, which includes any paid-for marketing not specifically included in the survey.
The net balance fell to a 16-quarter low of -11.7%, down from -4.2%. Spend on market research also dropped, with the net balance coming in at -10.5%, down from 3.1% in the prior quarter.
Meanwhile, the main media category recorded a drop of –6.7%, down from –4.3% last quarter.
The decline was driven by cuts across out-of-home (-18.9% from -12.8%), audio (-10.8%, from -17.8% ), published brands (-8.3% from -10.2%) and video (-1.0% from -10.7%).
Conversely, the other online advertising category saw a slight increase in marketing budgets (+0.7%, from +2.2%).
Despite the overall downturn, several categories increased this quarter. Direct marketing led the way, rising to 9% (up from 5.6%), with Bainsfair suggesting AI is playing a growing role in enhancing both the personalisation and efficiency of this medium for UK companies.
Budgets were also revised higher for events (net balance of 5.4%, from 12.3%) and PR (net balance of 3.4%, from 6.8%), although both categories recorded weaker growth than in the previous quarter.
Budget outlook and company confidence
While marketing executives revised their budgets down at the start of 2025, there is a more positive outlook for the rest of the 2025/26 financial period.
Looking ahead, Bainsfair says it’s encouraging to see many businesses are preparing to reinvest in main media, demonstrating a “continued belief in the importance of brand building, even in uncertain times”.
A net balance of 18.4% of marketers expect an increase in their total marketing budgets, with underlying data suggesting all categories, except sales promotions (0.0%), are expected to increase.
The highest level of optimism was recorded for events, which registered a net balance of 16.6%, followed by direct marketing at 12.9%.
However, budget growth for the other marketing areas was comparatively lower. This includes PR (3.3%), market research (3.1%) and main media (2%), with this latest reading the second-lowest in history – signalling some reservations around plans for big budget marketing campaigns
Companies show diminished confidence in their financial outlooks, both at the company and industry-wide level.
Respondents recorded a pessimistic outlook for a third straight quarter towards their own company’s financial situation. A net balance of -12.9% felt less optimistic about their own company’s financial outlook compared to –1.2% in the previous quarter, marking the lowest level since the closing quarter of 2022.
This was similar at the industry level, where the net balance hit a 10-quarter low of -37.4%, down from -20.1% in the previous quarter, indicating a less confident start to the year.
Among the survey participants, 45% were less optimistic about the financial outlook for their industry compared to three months ago, while only 7.6% expressed stronger growth forecasts.
