The UK’s printers are bracing themselves for increases in the price of paper, and quite probably other consumables that are sourced from overseas. The devaluation of sterling following the Brexit vote is blamed.
According to the latest BPIF Outlook survey, 50% of printers state that the rising price of paper is among their top three business concerns going forward. Six months ago this was cited by 10% of those replying. This fear is underlined by recently announced price increases from Sappi and ArjoWiggins among others.
However, it was not the top business concern. That remains the phenomenon of competitors pricing below perceived cost, mentioned by almost two-thirds taking part. While painful and real when jobs are lost, somehow this is not reflected in the rate of business closures that would be expected if companies were taking a hit on the majority of their work. It is also a concern that is not going to go away.
The third biggest concern relates to recruitment and the difficulty in finding skilled staff. This had been a 25% of participants in the Q2 survey. In Q3, 29% said it had become a problem ahead of late payment.
Recruitment is a issue when replacing lost staff or when a company is confident enough to grow. The survey hints in this direction, saying that after the deep intake of breath immediately after the referendum, business has picked up again and going into Q4, the BPIF believes that overall 2016 will prove positive.
When the previous survey was taken, there were serious levels of pessimism for the coming quarter. In the event that proved misplaced. Of those surveyed only 30% reported a decline in trading levels, 38% said that they had remained the same and 32% noted an improvement. This gave a balance of +2, rather better than the -14 that might have been anticipated.
Now in the busy pre-Christmas period, it would seem that almost two-fifths of those involved expect output volumes will have grown during the year and 46% that volumes will be stead. This leaves 16% expecting that volumes during 2016 will have shrunk.
When looking beyond their business, printers are more pessimistic, giving a negative balance for the question about the state of the trade in general. This is an indication that confidence is falling, says the BPIF, though not to the extent once feared. The expectation for Q4 is more positive.
Kyle Jardine, the BPIF research manager, says: “Confidence in the general state of trade in the printing industry has taken a knock that it hasn’t yet recovered from. While companies have reported some improvement in their output and orders there is less confidence for the wider industry. The Q2 report, in the immediate aftermath of the EU referendum, showed that confidence levels in 2016 have been lower than in recent years. There has been little improvement in Q3 – though a boost in Q4 is expected to lift confidence.”
At the Power of Print conference earlier in the month, BPIF chief executive Charles Jarrold had explained how the falling value of the pound could improve exports and that therefore the referendum result might have a positive impact for companies able to target exports. This would mitigate the impact of increasing paper prices.
Others, he says, will have to think hard, explaining: “Many will have a decision to make about whether or not they can pass cost increases on in higher prices, afford to take the hit in their margins or look to mitigate cost increases through their purchasing or through efficiencies elsewhere in their business. The industry is highly experienced in managing its costs carefully and that experience will be valuable as businesses face some difficult choices.”
The industry suffered a blip in the summer following the Brexit vote, and recovery since has been unsteady. However, print will end the year on a stronger note than had been expected at one stage and with a positive result for the year.
