The economy cannot grow unless we have more spending power

Hurrah for Janet Daley, writing in 9th October's Sunday Telegraph (page 28). She raises an issue dear to my heart.

"Until the households of Britain feel that it is possible - and sensible - to spend, all the funny money that comes off the the Treasury printing presses, and all the government grants to brave little enterprises, will not amount to a hill of beans."

Daley calls for tax cuts to increase real household income and stimulate consumer spending, arguing that the growth that would be stimulated by that spending would in turn provide more tax revenue.

I agree.

This quarter's IPA Bellwether Report, released last Thursday, shows a modest rise in expenditure but the most significant dip in business confidence ever recorded in its 10 year history.

This apparent contradiction is not surprising when you realise that the majority of expenditure is behind communication of promotional activity; a desperate bit to incentivise short-term purchases which will only lead to profit erosion, if IPA research and analysis based on previous recessions proves accurate.

My message to Government both echoes Daley's and adds a new strand.

Corporates need to be encouraged to spend too, and tax incentives against previous year sales are not a bad place to start. They need help to release investment in mid to long term quality brand communications. This will stimulate real consumer demand, get money circulating in the economy to support the cultural and creative industries, return businesses to profitability and deliver organic growth.

What does the New Year hold?

According to the IPA's latest Bellwether Report, researched and published by Markit Economics yesterday, UK adspend grew at an annual rate of 6.6% in 2010, in stark contrast to the forecast reduction of -1.1% one year earlier.

Initial budgets for 2011 are also set higher than 2010 actual spend. Main media budgets are set to fair relatively well, while budgets have also been set higher for direct marketing. In contrast, companies plan to reduce their sales promotion and 'all other' marketing spend in 2011. Growth of spend in internet advertising appears to be slowing.

Despite this relatively heartening news, companies are more pessimistic about the financial outlook for their businesses overall. Those considering prospects to have improved fell from 28% to 25%.

WPP revenues up in third quarter

Great to read in Netimperative this morning that WPP is reporting increased revenues for the third quarter of 2010.

It's also interesting to see that WPP's traditional advertising revenues have 'increased sharply' and that the company is cautiously optimistic about economic recovery. This is very much in line with the IPA's Q3 2010 Bellwether Report