20 May 2018 Business

Challenges loom as print's confidence weakens

The BPIF's Printing Outlook survey has underlined how stronger businesses are winning

The printing industry in the UK remains in a nervous state as the BPIF’s quarterly Outlook survey finds printers jittery about prospects for the next period, are reporting weaker profits and reman concerned about under pricing by competitors.

Despite this in the first three months of the year, performance was better than expected for many though only 3% reported that they were working at full capacity. More were working at above 80% capacity, as some increased utilisation from the 60-69% range and some fell back from the 90-99% spread.

Nevertheless Printing Outlook reports that 43% of printers said that output had increased, 37% that it had been steady, only 20% reporting a drop. This results in a +24 score while a +12 score had been forecast there months ago.

Some of this increase in what is usually the quietest quarter is attributed to overspill from the end of 2017, making it the first time for seven years that Q1 has been better than the previous quarter.

Few expect this to continue, and expectations for Q2 are net negative: more expect output levels to fall during the quarter than anticipate an increase. Cost pressures on consumables and wages are increasing, business rates and, although not mentioned specifically, GDPR loom.

Paper prices remain the second largest area for concern after competitors pricing below cost. Ability to find skilled labour is still the third most mentioned challenge.

This is having an impact on business health. The BPIF works with Begbies Traynor to identify trends in this area. It has compiled an analysis of the 5,000 largest companies in print and packaging, finding that a growing proportion are in a secure financial position and diminishing number in a high risk area. However the number that have recorded severely detrimental reports or actions has increased in the last three years.

In Q1, there were 21 insolvencies in print, 16 of which were voluntary, three CVAs, one compulsory and one liquidation. However, there was an increase in the number of businesses under significant distress, due to a court order or with insolvent or out of date accounts, compared to a year earlier.

Concerns continue about the impact of Brexit, with a slightly increased negative balance compared to the survey looking at the end of the year.

And figures published for 2017 show that paper and board consumption in the UK fell a further 5.2% overall, with newsprint accounting for an 11% drop and carton boards showing a 5% increase. Standard coated woodfree and uncoated mechanical grades fell 11% and 16% respectively. Shipments of uncoated woodfree dipped just 0.5%, indicating the relative popularity of this style of paper.

In short as volumes drop away, printers are right to feel a little twitchy. Forecasts for advertising growth are tempered by the way that most of the spend is directed to the internet and away from print reliant areas like direct mail and promotional events, though it is to be hoped that the World Cup may provide a welcome boost after the weekend’s, albeit relatively minor, Royal Wedding.

Gareth Ward

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Forecasts for the second quarter of the year have dipped, showing a distinct lack of confidence, despite Q1 turning out to be better than expected for print. Any expectations for growth remain fragile.

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