The BPIF’s latest Printing Outlook survey reveals that print industry output, order and confidence all flatlined in Q2 2023.
The previous forecast was that Q2 would experience an upturn in industry performance but the BPIF said this expectation has been thwarted following a fragile economic performance, prolonged concerns over inflation levels, and the continued upward trajectory for interest rates. Printers are focussing on controlling costs, increasing productivity, and managing sales more effectively. Cost pressures are easing but lower prices may be required to encourage output and orders to grow in Q3, and where pricing goes is a critical concern for many.
The online trading trends survey was carried out during 30 June – 18 July and received responses from 107 companies employing 6,462 people with a combined turnover of just over £1bn. It reveals that less than 30% of printers managed to increase their output levels in the second quarter of 2023, whilst 43% were able to hold output steady. That left 27% that experienced a decline in their output levels. The resulting balance (the difference between the ups and the downs) was therefore +3, well below the over-optimistic +34 that was forecast, but a little improved from the -3 experienced in Q1. This lacklustre outcome at least reverses Q1’s negative report, but it has clearly been a tougher quarter than was expected three months ago.
Expectations for the period ahead have now been significantly dampened, in comparison to last quarter’s forecast, as the challenging climate extends into Q3. Output growth is forecast to increase for 32% of companies, 41% predict that they will be able to hold output levels steady in Q3. That leaves 27% expecting output levels to fall. The resulting balance forecast is +5 for the volume of output in Q3. This Q3 forecast has been formed amidst a sustained period of high levels of inflation, and expectations of several further increases to interest rates. However, as the survey period closed new inflation figures revealed a drop in inflation, and now lower expectations for the ceiling in interest rates have formed. This may improve the outcome as we move through the second half of the year.
Competitor pricing levels – or rather the perception that some competitors are pricing below cost – has now become the top business concern for printing companies. Rising from a ranking of second last quarter, competitor pricing replaces energy costs as the most selected business concern. Energy costs, now the number two concern, was selected by 44% of respondents, down from 68% last quarter, 75% in January, and 83% in October. However, whilst the impact of energy costs appears to be waning for some companies there are still many that have been critically impacted by significant increases and uncertainty and unfortunate timing around energy contract renewals.
The third ranking concern is now sales levels, selected by 41% or companies. Companies are having to adapt and work differently or harder to maintain and grow sales in markets, and with clients that are also changing rapidly. Further back in fourth position is as wage pressures, with a selection from 35% of respondents. Most companies have already conducted their pay reviews this year. However, concerns do remain over wage pressures and the effect of minimum wage increases, and the knock-on effect that has on wage structures and pay differentials throughout businesses. Continued high levels of inflation, and the effect that has on pay review demands, means wage pressure concerns may will resurface at some point. Access to labour was ranked fifth in July.
BPIF economist Kyle Jardine said: “Like orders and output, the view of the general state of trade was significantly lower looking back at Q2 now, than the forecast was for Q2 – and confidence remains fragile in Q3. As previously identified, a period of lingering and extreme cost pressures, combined with economic uncertainty, had eroded earlier recoveries in confidence. Whilst more positive news on inflation (and industry costs) appears to be forming, it has not yet been enough to stimulate any significant improvements in confidence.”
Charles Jarrold, BPIF chief executive, said: “Unsurprisingly, a slowing economy has had its impact on the sector, being as it is a bellwether. We are seeing some signs that the higher interest rates are impacting, not just on business, but also in reducing inflation. Against an uncertain economic backdrop, the cash flow analysis in the full report shows that much of the industry is in a reasonably strong financial position, 87% have either an excellent, good, or normal cash flow position. However, there is still a realisation that companies need to pay close attention to this; and devise and follow plans to improve their profitability. Controlling costs is key, the report highlights this and some other areas that companies are focussing on.”
