UK printing industry showed strong recovery in Q2

Richard Stuart-Turner
Wednesday, September 1, 2021

The forecasted strong recovery in the UK printing and printed packaging industry was realised in Q2 and is expected to carry into Q3, albeit at a slightly lower rate.

Jardine: "There is plenty in the survey to be positive about"
Jardine: "There is plenty in the survey to be positive about"

The BPIF’s latest Printing Outlook, a quarterly published study of the health of the industry, found that while in 2020 the initial coronavirus outbreak hit at the end of Q1, Q2 bore the brunt of the impact, and while Q3 exhibited a recovery of sorts, Q4 experienced a halt on that recovery path.

Q1 this year then saw some moderate improvements as an equilibrium was achieved between the ups and the downs, but it took until Q2 this year for significant improvements in workloads to come through, following the loosening of lockdown restrictions.

The BPIF said Q3 was expected to see continued growth and increased activity levels.

The survey found that 58% of printers managed to increase their output levels in the second quarter of 2021 while a further 29% held their output steady, and the remaining 13% suffered a decline in output.

Activity levels looked set to show continued growth in Q3 as many printers remained positive about output growth in the summer period. Output growth was forecast to increase for 50% of companies, with a further 37% predicting that they would be able to hold their output levels steady in Q3. Only 13% were expecting their output levels to decline.

The BPIF noted, though, that the third quarter is often restricted by workforce holidays, and this summer there was also the added complication of isolation pings coming from the Covid-19 apps.

Indeed, absence enforced by illness related to Covid or the enforced isolation requirements resulting from close contact was selected as an operational challenge by 41% of survey respondents, while 15% also indicated that absence due to school closures was also challenging.

Supply shortages of raw materials is now the most challenging issue affecting companies’ ability to recover, though. A ‘lack of demand’, which was previously the highest selected operational challenge in Q1, is now the second ranked challenge.

In terms of business concerns, the cost of printing substrates – including paper, board, and plastics – is now top ranked, with competitors pricing below cost the second ranked concern.

Dealing with the economic impact of the pandemic is now ranked third, having been the top ranked concern in the Q1 survey, while access to skilled labour was another area of significant concern.

Average costs have continued to soar, marginally above the expected rate, and the upward pressure was expected to intensify in Q3. Increasing paper and board costs provided the most inflationary pressure in Q2, though significant inflation was reported across all cost areas.

BPIF economist Kyle Jardine said: “There is plenty in the survey to be positive about – a strong economic recovery, stimulated by vaccinations and the easing of restrictions. Orders, output, confidence, and capacity have all grown strongly.

“However, the printing industry hasn’t yet recovered to pre-pandemic levels, cost pressures have intensified, the supply of certain materials is under threat, recruitment is being stifled by availability, and the printing industry has not escaped the pingdemic.

“Despite the challenges, expectations remain positive for further recovery in the period ahead. The furlough scheme is winding down and more employees are becoming economically active. Also, the financial health of many companies in the industry is strong and secure; ready to face the new challenges that lie ahead.”

The survey also found that industry capacity utilisation has continued to improve, with July capacity utilisation greater than it was in April. While capacity utilisation has not yet returned to pre-pandemic levels, it is much closer than it has been.

Additionally, employment levels increased, on balance, in Q2 as more companies recruited than in Q1 and slightly fewer decreased their employment levels.

98% of businesses surveyed said they expected to have at least 50% of their employees, who are currently working from home, back in the office – at least to some regular degree – by the end of September. However, a hybrid model will become the template for many companies for some time.

Finally, the number of printing and packaging companies experiencing ‘critical’ financial distress increased only marginally in Q2. Those experiencing ‘significant’ financial distress decreased considerably but remains historically high.

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