Confidence improves in Q3 but Q4 forecasts downbeat

Richard Stuart-Turner
Wednesday, November 11, 2020

UK printing and printed packaging has rebounded from the record low seen in the second quarter of 2020, but not yet by enough according to new research.

Jardine: "Things have been gradually picking up since Q2, generally"
Jardine: "Things have been gradually picking up since Q2, generally"

The BPIF’s latest Printing Outlook, a quarterly published study of the health of the industry, found that while Q2 bore the brunt of the impact of the coronavirus pandemic that hit at the end of Q1, and Q3 exhibited a recovery of sorts, forecasts for Q4 are gloomier.

In light of the resurgence of Covid-19, various regional or national lockdowns and climaxing Brexit uncertainty, the path ahead is now expected to take a dip for the worse and risks turning the recovery from a ‘V’ shape into a ‘W’.

The survey found that 35% of printers managed to increase their output levels in the third quarter of 2020. A further 22% were able to hold output steady but 43% were adversely affected by a decline in output.

Printers are not expecting activity levels to continue to improve along the same trend path in Q4. Output growth is forecast to increase for 23% of companies. Almost half (47%) predict that they will be able to hold their output levels steady in Q4 but 30% expect output levels to fall.

Q3 has seen a more turbulent recovery for a significant number of companies. A challenging summer period and concerns over the ‘second wave’ of Covid-19 is affecting confidence and order placement.

The survey also found that, as companies are being weaned off government support measures before their activity levels have recovered, they are needing to further adjust their costs accordingly, and there are rising concerns about keeping skilled workforces intact.

“The survey was carried out before the furlough extension announced so you have to bear that in mind,” BPIF economist Kyle Jardine told Printweek.

“But devolved regions were already locking down and the localised ones were coming into force too so that clearly is what is putting a dampener on the expectations for the fourth quarter.

“In the normal state of affairs, the fourth quarter would normally be where many companies would need to see a boost in their annual cycle but with the way things were this year, that was already not being expected.”

He added: “Things have been gradually picking up since Q2, generally. The summer months did see output coming back, but it just didn’t quite reach the levels we had hoped to see, I think there was maybe a late summer slowdown. And then the second wave coming in is a bit of a roadblock to further recovery but that could easily change again.

“On the downside, we’ve got the Covid resurgence and the extra restrictions and we’ve also got Brexit uncertainty, but in light of the most recent news you’ve got the positive of a vaccine coming in and plans are already being made to roll it out.

“There’s potential there then that that will improve confidence in the run up to Christmas, it might give a bit of a boost to a Christmas splurge.”

Dealing with the economic impact of Covid-19 remains, by far, the most important business concern for businesses, as selected by over three-quarters (77%) of respondents.

Brexit has resurfaced to become the second ranked concern, with a 45% share of respondents, and the survival of major customers was ranked third with 33%.

Companies continued to express a range of concerns regarding the impact Brexit may have on their business. The primary concern remains maintaining a reliable and secure supply chain, but the number one ranked Brexit opportunity was that there would be a general swelling of home-grown support for British business.

The survey also found that companies are now anticipating that they will be forced to make redundancies before the end of the year.

Almost half (48%) had said they were expecting to make some redundancies – 24% anticipated they would need to make 1-5% of their workforce redundant, 9% of firms said they were faced with redundancies in the range of 6-10% and 3% of companies were expecting to make 11-15% redundant.

4% were considering making 16-20% of their workforce redundant and 8% were anticipating that over 21% of their staff would be made redundant before the end of December.

However, as aforementioned, the survey was carried out before the furlough extension was announced, which could delay or change these decisions.

“It’s possible in many people’s eyes that the furlough extension was too little too late in terms of the extension. There was so much uncertainty around it and a lot of these decisions will have already been made, so the late introduction of this extension may not be able to change many of these decisions,” said Jardine.

“On a broad level, unemployment is certainly still expected to increase in the final quarter of the year, and I would unfortunately expect to see industry redundancies in the next few months. The effect of the scheme may be that it broadens the horizon over which some of these redundancies will take place, which is something the government will be seeking to achieve, but it’s not going to wipe out many of these redundancies from taking place.”

The Printing Outlook survey was carried out between 1-15 October 2020 and received responses from 161 companies employing 11,887 people with a combined turnover of over £1.8bn.

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