Sir Martin Sorrell has advised ITV's most senior executives not to reduce the broadcaster's £1 billion programming budget, despite the pressure on advertising revenues, The Times has learnt.

The chief executive of WPP, the world's second-largest advertising group, told 100 ITV executives, including Michael Grade, the executive chairman, Peter Fincham, the director of television, John Cresswell, the chief operating officer, and Rupert Howell, its managing director of brand and commercial operations, that cutting spending on programming would ultimately scare off big advertisers.

“It's critical, absolutely critical,” Sir Martin told the executives gathered at ITV's Gray's Inn Road headquarters in London. “Our clients are looking for mass audiences, high shares, interest in the content, engagement in content and the programming ... It is going to remain tough and I think you have to batten down the hatches, obviously, on the cost side, but you've got to remember that you're not going to cut your way to growth.”

Some at ITV may not welcome Sir Martin's comments about programming budgets, particularly in the light of the contract rights renewal (CRR) mechanism, brought in when Carlton and Granada merged in 2003 to prevent ITV abusing its power in negotiations with advertisers. ITV believes that CRR, which prevents it from raising advertising rates to compensate for lost audiences, has cost it about £300 million. Mr Grade has argued that the mechanism for negotiating ITV1 airtime deals is a straitjacket that impedes his plans for a programming-led revival.

There has been concern that the advertising slowdown and the impact of CRR would put pressure on the group's programming budget. As well as the financial impact of the renewal mechanism on ITV, Mr Grade has argued that CRR penalises the channel for taking creative risks on new programmes that initially may not get big ratings.

Sir Martin did not discuss the impact of CRR, but he highlighted the need for public service broadcasting reform, saying that changes in the regulatory framework could give ITV more flexibility. He pointed out that, despite expectations that next year the internet would take more advertising by revenue than television, TV is heavily regulated and the internet is not.

“Google is effectively the biggest media owner in the UK and is unregulated,” Sir Martin said. These comments will be welcomed by Mr Grade, who regularly invokes Google's liberty when campaigning to overhaul CRR and other regulatory burdens.

As broadcasters such as ITV struggle with declining audiences and falling advertising revenues, Sir Martin said that the Government should be more open to new revenue streams, such as product placement: “It [product placement] has to be done tastefully, it doesn't have to be in your face, but I do think it's a major missed opportunity. The Government doesn't understand that, but I think over time it will come.”

Sir Martin told ITV that he did not agree with the Chancellor's recent comments about the British economy being at its lowest ebb for 60 years. “I don't think that the situation in the UK is as bad as 2001 and 2002,” he said. “I think it's tough in the UK, I think it will remain tough. I don't see it improving in the balance of 2008, I don't see it improving 2009, but I do think it will improve in 2010.”

Emap mover

ITV has appointed Ian Griffiths, the former finance director of Emap, as its new chief financial officer. The post had been held by John Cresswell, the chief operating officer, who combined both roles.

Mr Griffiths joined Emap, the magazines, radio and business media group, in 1994 after six years at Ernst & Young. He was finance director from 2005 to 2008.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax