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Marketing budgets among small businesses fell in Q2 for a third consecutive quarter as companies attempt to reduce operating costs, research finds.

Some 22 per cent of companies reported a downward revision against 20 per cent that reported an increase, creating a net balance of 2.2 per cent, according to research by the Institute of Practitioners in Advertising (IPA) and accountants BDO.

Marketing executives’ confidence for their own companies has dropped to the lowest in nine quarters, with the net balance dropping from 12.8 per cent in Q1 to 3.3 per cent in Q2.

IPA president, Nicola Mendelsohn says, ‘The economy is going sideways and this seems to be the way it is going in the advertising marketplace too. The decline in confidence doesn't augur well, but is not surprising amidst a continuing climate of concern surrounding the financial and political outlook both at home and internationally.

‘But we should take some comfort from the fact that the rate of budget trimming is at its lowest in three quarters, and that there are advertisers maintaining spend nevertheless.’

Andy Viner, head of media at BDO adds, ‘Marketing spend has proven to be a good barometer of the economy in recent years. The latest IPA/BDO Bellwether report signifies renewed caution from marketing executives as corporates continue to monitor discretionary expenditure to protect profit margins and strengthen balance sheets.

‘Fortunately, the outlook for 2012 is looking more positive. There is certain to be an uplift in marketing expenditure connected with the 2012 London Olympics which will provide a welcome fillip to the marketing services industry after a challenging couple of years.’