The latest survey was carried out online during the period 1-11 June 2010, and consists of 103 companies employing 10,965 people with a turnover of almost £1.2 billion.
The number experiencing improvement was above expectations at the time of the last survey, when only 18% had predicted expansion, and more than offset the 15% of firms that said trade had deteriorated. The positive balance of +18 between those firms seeing an improvement and those seeing a deterioration compares with a negative of -21 through the winter months. Respondents expect this improvement to be sustained in the next three months. A quarter expects trade to pick up through the summer months, although the majority (59%) anticipate that trading conditions will remain similar.
Reflecting the general improvement within the industry following weakness through much of 2008 and 2009, no less than half of firms believe that the summer period will be better than a year ago. However, there were two common major concerns highlighted throughout the responses to the survey; one being disillusionment at the level and frequency of paper price rises from suppliers, and another being the continuing problems resulting from phoenix / pre-pack companies.
Over-capacity is still an issue but utilisation has improved, with more printers working closer to capacity than three months earlier. Order levels exceeded expectations, with no less than two-fifths of UK printers benefiting from a pick up in domestic order levels during spring. The number reporting an increase was much better than forecast, with only 19% having predicted improvement. That said the 21% that saw a dip in order levels was close to double that forecast.
Output moved in tandem with the changes in order levels, with results also pretty much in line with expectations with 36% boosting production. However the forecast for the next three months not so good, with the number predicting a rise at 32% largely offset by 23% that expect demand to contract, leaving just under half that anticipate similar levels of incoming work. Much of the improvement reported in the last quarter seems to have been in the form of volume growth at the expense of margin, and the inconsistent nature of order levels has been difficult to manage. Looking towards the summer there are concerns about the impact of reduced government expenditure and client budget cuts.
After a prolonged period where prices had been forced downwards and very few firms were able to increase levels, the spring period saw 28% actually raise domestic prices. Slightly more cut prices, but the negative balance of only –3 was a significant improvement on the recent past. The results also beat forecasts, as just 9% anticipated raising prices and 40% were prepared to lower rates. That said, increases in many cases were needed simply to pass on higher raw material costs and this is a factor that had led to more than a third predicting higher domestic output prices during the summer. Indeed continued paper and ink price inflation casts a dark cloud over the industry, with further cost increases for both expected over the summer. Nevertheless a higher proportion are managing to pass on these increased costs, with more than a third predicting higher domestic output prices during the summer.
Despite a squeeze on margins more printers making a healthier profit than three months ago. Of the firms responding to the survey, a lower number (49%) posted a minor rise in earnings of up to 6%, which compared with 72% three months earlier. What’s more, just 3% instead of 9% recorded a loss. The one negative movement was a drop in companies recording earnings growth of over 10%, which halved to 4%.
The survey shows an upbeat picture for exports, with trade expected to remain busy despite concerns over a stronger pound. On the back of generally solid demand, no less than 43% of print companies anticipate a pick-up in activity over the coming three months, with a further 55% believes that trade will remain at current levels.
Bad debt remains an unwelcome cost, with a balance of 20% or respondents reporting an increase in the level of bad debt in the last 12 months, while print and packaging insolvencies reached a new peak in the first quarter of 2010 but eased in the second quarter. The latest available data from the Red Flag Alert statistics reveal that 111 print and packaging companies became insolvent, up from 105 the previous quarter. However, the number of industry insolvencies has curtailed in April and May to 27 and 25 respectively. Insolvencies for the second quarter of 2010 are likely to fall to around 78 but could well surge again towards the end of the year.
Three-fifths of print firms saw no change in staffing levels over the past three months, but of the remainder more companies cut numbers employed than increased the size of their workforce. A small negative balance compared unfavourably with a positive forecast at the time of the last survey. It also ended the run of positive balances in employment we have seen over the previous six months.
After a successful IPEX, a balance of +17 predicts spending more on plant and machinery over the next 12 months. While down on three months earlier, the result compares very favourably with the same period last year. Overall, 28% of printers intend to spend more over the coming year, 26% predict a similar level of investment and 12% less. This leaves more than a third (34%) forecasting that no investment.
BPIF Corporate Affairs Director Andrew Brown says” No-one wants to tempt fate, and we all know that one swallow doesn’t make a summer, but these survey results are very encouraging. It is our best reading for the spring period for eight years, and compares favourably with our long-term average of -9 for the spring quarter. Unfortunately the spectre of more paper and ink cost increases continues to cast a shadow across our industry, with fears about the impact of this on print’s competitiveness. However it appears that many of our members have been able to pass on cost increases to date, reflecting the value placed on their products by clients. It’s also clear that worries about pre-packs and phoenixes are still a major concern and this is an issue on which the BPIF is pressing for legal reforms”
About The British Printing Industries Federation (BPIF)
The BPIF says: “The BPIF is the principal business support organisation representing the UK print, printed packaging and graphic communication industry. It is one of the country's leading trade associations.”
