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Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

by | Jul 6, 2022 | Public Relations

Many businesses around the world fear an oncoming recession as central banks ramp up interest rates in a bid to curb inflation. But as they look to protect themselves from the worst effects of a potential recession, it’s clear that many haven’t learned from the past and will likely cut sales and marketing budgets, according to new research from UK-based market research agency Sapio Research.

The firm’s latest International Business Barometer report, Wave 6: Preparing for a Recession?, shows that 95 percent of businesses around the globe are concerned about a potential recession. Those concerns, however, aren’t equally spread. In the US, 45 percent of businesses are highly concerned about a recession, compared with just 11 percent in Germany.

Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

Just over a fifth of businesses (22 percent), meanwhile, are already being affected by the current economic uncertainty

Again, these effects aren’t equally spread. Japan and the US are faring worse, with 28 percent of businesses in those countries already feeling the pinch. Globally, the percentage of affected companies is expected to rise to 42 percent by the end of the year.

The research also shows, however, that the responses to any recession are likely to be as misguided as they’ve been in the past

“While many companies say that their top mitigation strategy will be ramping up sales and marketing activities, most are still likely to bite the hand that feeds them,” said Jane Hales, managing partner at Sapio Research, in a news release. “The highest proportion of potential redundancies are set to be made in crucial areas such as sales and communications.”

Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

Additionally, half of businesses anticipate cutting discretionary marketing spend (such as PR, events, advertising, and sponsorship) over the next 12 months

At present, just six percent of companies are cutting marketing budgets. With the world’s advertising leaders currently gathered in Cannes for the annual Cannes Lions International Festival of Creativity, that’s hardly likely to come as welcome news. Nor is the fact that many business leaders question the effectiveness of advertising as an influencing channel.

Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

“Globally, social media and paid social media are significantly more valued marketing channels for driving retention and drive growth than advertising, particularly in the US,” said Hales. “The UK is the only country that values the two channels equally.”

Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

At least some business leaders, however, view any potential recession as an opportunity

In the US, for example, some 37 percent plan to use it to and the promise of more captive audiences as an opportunity and plan to increase their marketing spend.

This may ultimately be the better approach.

Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

“Companies that cut their marketing budgets due to recession not only make it harder to retain customers but also to bring back new and existing customers once economic growth returns,” Hales concluded. “They also leave themselves more vulnerable in the event of a PR crisis that puts the organization at risk, something that 41 percent of US organizations experienced post-COVID-19. It would be a shame if they chose to forgo the lessons learned during the pandemic and put themselves at risk again.”

Fearing recession, 95% of businesses will cut budgets—is PR on the chopping block?

Download the full report here.

Richard Carufel
Richard Carufel is editor of Bulldog Reporter and the Daily ’Dog, one of the web’s leading sources of PR and marketing communications news and opinions. He has been reporting on the PR and communications industry for over 17 years, and has interviewed hundreds of journalists and PR industry leaders. Reach him at richard.carufel@bulldogreporter.com; @BulldogReporter

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