The current COI budget cut announcement comes as no surprise as the conservatives pledged to reduce advertising spend should they come to power. Government marketing and advertising spend has been steadily increasing over the last years, reaching about five times its level from a decade ago, and making COI the single biggest advertiser in the UK.

As part of a first stage in the government's review process, all new advertising campaigns are frozen from now on until the end of the financial year in March 2011; only campaigns qualifying as 'essential' will receive a green light. These have been defined in a letter to media agencies by three criteria: campaigns that allow the government to fulfil a duty to inform the public such as legislative changes; campaigns that provide the public with information crucial to the effective running of the country such as military recruitment; and campaigns that can offer unequivocal evidence that they will deliver measurable benefits related to public health and safety.

According to Screen Digest calculations, a cut of 35 to 50 per cent of COI spend would generate £70 to £100m less advertising revenues across all media on a full year basis, with TV alone losing £30m to £40m, representing approximately one per cent of annual television advertising revenues.

Television and radio receive the largest share of Government media spending. Radio is the most exposed, as Government spending represents 16 per cent of total advertising revenues. It remains to be seen how quickly the cost will be implemented and whether the 2010 freeze will lead to a permanent downsizing of Government adspend. In any case it will be one of the factors slowing down the adspend recovery in H2 and 2011.

Prior to the elections, the COI was already looking at ways to drive cost efficiency in the way it ran its operations. Following a lengthy consultation period, it proceeded to combine all media buying activities into one consolidated account. In February 2010, media agency WPP's specially formed M4C unit (consisting of Mediaedge:cia, Mindshare and Mediacom) won the pitching process for this account. The two other shortlisted candidates for the account were Aegis Media's joint pitch with out-of-home specialist agency Posterscope, and Smile, a joint pitch by Starcom MediaVest and digital media agency I-level. I-level held the COI digital budget prior to the consolidation process and had to be placed into administration after losing the pitch in favour of WPP's M4C.