The hidden consequences of the November budget on marketers
Yesterday, Chancellor Jeremy Hunt made a budget announcement that carries various implications for marketers. Here we provide the main out-takes.
Consumer behaviour still depressed
The budget included a reduction in National Insurance (NI) contributions for workers and employers. While this provides may put £450 back into the pocket of the average worker earning £35,400 a year, it's not substantial considering the backdrop of ongoing inflation, high-energy prices and higher interest rates. It’s a welcome step in the right direction, but little more than a plaster on a society that has been reeling this year.
Within this context, the budget delivered small victories for key demographics that were already struggling with the cost of living. The triple lock means their benefits to rise in line with inflation. Furthermore, the chancellor announced an increase in the National Living Wage to £11.44 an hour from April 2024. However, these are cash-strapped groups that have little to spend on highly marketed products.
Business benefits unlikely to impact marketing budgets
As with consumers, similar can be said for the business tax cuts. Accordingly, the UK will have the lowest headline corporation tax rate in the G7 and the most generous capital allowances in the OECD group of major advanced economies, such as the United States, Japan, South Korea and Germany. This will boost business investment by 14 Billion, which is again a step in the right direction, but with the UK sitting a one of the most stagnating economies in the G7 over the last few years.
The key for marketers is that, especially when combined with the consumer dynamics, and broader macroeconomic conditions for 2024, means that marketers are unlikely to get any more money any time soon. This brings us on to the most concerning part of the autumn statement.
A more bleak marketing outlook
During his delivery of the Autumn Statement in the House of Commons, Chancellor Jeremy Hunt addressed concerns about growth projections. Contrary to earlier forecasts from the Office for Budget Responsibility (OBR), Hunt stated that the economy is anticipated to grow by 0.7% in 2024 and 1.4% in 2025. This announcement represents a notable deviation from the OBR's previous projections of 1.8% growth in 2024 and 2.5% in 2025. This leads to the following implications for marketers.
Reduced Consumer Spending Confidence: Slower economic growth often leads to reduced consumer confidence. When people are uncertain about the economy's trajectory, they tend to be more cautious with their spending. This cautiousness translates into lower consumer spending, which can pose challenges for businesses trying to promote and sell their products or services.
Continued budget Constraints for Consumers and Businesses: A slower-growing economy may result in tighter budgets for both consumers and businesses. Consumers may cut back on discretionary spending, and businesses may become more conservative with their marketing budgets. This, in turn, can limit the resources available for marketing initiatives, making it challenging for marketers to reach their target audiences effectively.
Impact on Investment and Innovation: Slower economic growth can also affect investment and innovation within businesses. Companies may be more hesitant to invest in new marketing strategies, technologies, or product development when economic conditions are uncertain. This reluctance can hinder marketers' ability to leverage cutting-edge tools and techniques to stay competitive.
Competitive Pressures: In a slow-growth environment, competition for a share of the market becomes more intense. Businesses may intensify their efforts to capture a smaller pool of consumer spending, leading to increased competition. Marketers must navigate this heightened competition and find ways to differentiate their offerings effectively.
Delayed Recovery in Consumer Confidence: Even if the economy starts to recover in the future, the impact of slower growth on consumer confidence may linger. It often takes time for consumers to regain trust in the economic stability and resume normal spending patterns. Marketers may face the challenge of convincing cautious consumers to engage in discretionary spending again.
A bit of a meal
In conclusion, Chancellor Jeremy Hunt's budget announcement provided some cheer for marketers, but hardly enough for them to get out the bunting. The downgrade in growth projections was particularly concerning and although some demographic groups experienced positive changes, the overall impact on marketing budgets is expected to be minimal.
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