Industry sees Q2 boost but confidence for Q3 dips

Richard Stuart-Turner
Monday, August 8, 2022

The UK printing and printed packaging industry showed stronger growth in Q2 2022, as output and orders performed slightly better than forecast, but a continued recovery is expected to be under more pressure in Q3.

Jardine: "Q3 is expected to be a tougher climate in which to operate"
Jardine: "Q3 is expected to be a tougher climate in which to operate"

The BPIF’s latest Printing Outlook, a quarterly published study of the health of the industry, reported that while Covid hasn’t vanished, and worldwide cost inflation is providing operational challenges, strong output and stable orders enabled positive growth in Q2.

The survey found that 50% of printers managed to increase their output levels in the second quarter of 2022, while a further 36% were able to hold output steady. The remainder did experience a fall in their output levels, however.

Activity levels are still expected to be positive in Q3, though not as strong as in Q2. Output growth is forecast to increase for 36% of companies, while 47% predict that they will be able to hold output levels steady in Q3. The remainder are expecting their output levels to fall.

The Q3 forecast is based on expectations from printers that there will be no new dramatic shocks that will prevent further progress along a steady recovery path, at least in the immediate short-term.

Energy costs have remained the top business concern for printing companies, once again just ahead of substrate costs. Energy costs were selected by 68% of respondents, with substrate costs (paper, board, plastics etc) selected by 65% of companies.

The BPIF said energy costs attract concerns beyond their direct impact on energy bills to printers, as companies are aware of a very strong link between the cost of energy, and the cost of the paper and board supplies.

For the third running quarter the survey included some questions to help establish the extent and make-up of some potential constraints on capacity.

The identified constraints were supply chain issues affecting the availability or timely delivery of material inputs, a shortage of skilled employees, a shortage of unskilled employees, and anything else, e.g., machine downtime due to failures, extra maintenance, or parts and service delays.

Up until now the most widespread and significant of these constraints has been supply chain issues but in the latest survey a shortage of skilled employees has been identified as the most widespread and significant constraint. 40% of companies reported that this was constraining their capacity; by between 5% and 15% in most cases.

BPIF economist Kyle Jardine said: “From an output, orders, and industry turnover point-of-view the printing industry was still recovering well in the second corner of this year. Though turnover will have been inflated by the significant increases in all cost areas to business which have filtered through to output prices.

“Q3 is expected to be a tougher climate in which to operate. Confidence has dipped for the quarter ahead, in the midst of extended cost inflation and constraints to capacity – in particular difficulties around securing adequate labour; a situation that is unlikely to improve during the summer holiday period.”

Jardine advised printers to be aware that their cashflow levels maintain enough of a buffer for future cost inflation.

“The risk of global supply chain disruption remains high – so be mindful of stock levels, sources of supply, and be aware how cost pressures, pricing and a squeeze on household incomes might affect demand for your products.”

The report also found that in March industry turnover, at just under £1.3bn, was 19.8% higher than March 2021, and 14.2% above the pre-Covid comparison to March 2020. There was a downturn in April, but this was followed by a pick-up in May.

Forecasts were expecting to see stronger trading in June and July before a further retraction in August and then some stronger growth toward the end of the year.

Meanwhile, the vast majority of exporters were challenged by additional administration (82%), additional transport costs (69%), and customs duties or levies (30%).

Finally, the report found that the number of printing and packaging companies experiencing ‘critical’ financial distress increased in Q2 2021. Those experiencing ‘significant’ financial distress decreased slightly, back to a level similar to Q2 2019.

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