High inflation, a higher interest rate, material shortages and a drop in consumer demand have led to the print industry facing another historic crisis, just six months after Britain left lockdown for good.

Brendan Perring, general manager of print association the IPIA, said the combination represented a “perfect storm” for the vulnerable industry.

Most recently, The Bank of England raised its interest rate to 1.75% on 4 August in an effort to combat inflation, which it expects to reach 13% later this year.

The rise is expected to return inflation to the Bank’s goal of 2% by the end of 2023, by discouraging people from spending and borrowing, and encouraging them to save.

This same measure, however, will only encourage the slowing — and soon, shrinking — of the UK economy, according to economists. The Bank of England said it expects the recession, defined as two consecutive quarters of falling GDP, to last until the end of 2023.

The economic slowdown and resultant fall in revenues is only the latest in a long list of factors that have plagued the print industry, including Brexit, Covid-related debt, soaring utility costs, and the price and scarcity of raw materials.

Perring told Printweek: “Printers have a very complex supply arrangement, and a very complex sales and outgoing arrangement.

“Over two or three decades, pressure on the industry has meant that much like many other manufacturing industries, we have become a ‘just in time’ sector.”

By operating ‘just in time’, print businesses order just enough consumables to complete the job they’re working on, because they cannot afford to keep money tied up in warehoused stock.

“It’s given our industry a very serious vulnerability," Perring added.

‘Just in time’ operation has left print businesses particularly exposed to volatility and shortages in the paper and card supply chain.

Bruce Thomson, managing director at direct mail specialist Bakergoodchild, said many printers have been challenged by spiralling paper costs and difficulties in sourcing the paper they need to fulfil orders, with coated and folding boxboard particularly difficult to find.

He said: “Pulp shortages, energy surcharges and increased transport costs all contribute to the tonne rate, which has risen in excess of 30% within the last 12 months and is still rising.”

Likewise, by late July 2021, energy costs accounted for 12% of the paper tonnage price - now, one year on, they make up more than 60%.

Increasing paper prices do not just squeeze the margins of British printers, however. According to Simon Rosenheim, managing director of global print management company Imago Group, high European paper prices have driven publishers to print in the Far East.

Paper, he said, costs about 65% more in Europe compared to China, where both supply and price is relatively stable.

Rosenheim said: “There’s always been a disparity, but it has widened markedly this year. 

“This has been compounded by inordinate supply chain issues in Europe, meaning that some papers need to be ordered six months before the manufacturing is planned.”

High energy costs, however, also affect printers more directly.

Paul Manning, managing director at London-based printer Rapidity, told Printweek that while the company could handle increasing paper prices and inflation-related pay rises by raising its prices, the rise in energy costs is more problematic.

“The one thing we can’t continue to see rises in is commercial energy rates. 

“We, like many, have expiring fixed price energy deals coming up, and we’re looking at a 400% increase in price. It’s a major problem.”

For Rapidity, this would mean £150,000 to £200,000 added to its energy bill.

“While I know we can cater for this, I simply do not understand how some businesses will survive these increases - especially if they get worse, or are here to stay.”

For many, raising prices will be a necessary, if short-term, solution. According to Rosenheim, book publishing is particularly resilient to downturns, because of books’ perception as an affordable luxury. 

He said: “Key for us is making sure that neither we, nor our printers, have to absorb the cost increases alone. Pressure needs to be put on the publishers to accept that the RRP of their products might have to increase.”

Manning also advocated a measured increase in price: “We will simply have to increase our prices when our costs increase.

“I have seen evidence in the market of some printers lowering their prices - but in general, as long as the sensible majority increases its prices, then we should all be fine.”

Zoe Deadman, managing director of sustainable printer KCS Print, was less optimistic about price rises, however.

Speaking to Printweek, she said: “It’s really a question of how long our customers are able to take the price hikes before they switch to digital alternatives.

“With households feeling the pinch, our customers will need to be sure they are getting every bit of value out of the print orders they place.”

KCS has already cut some of its costs by discontinuing its night shift, when its machinery can’t be powered by its Cornwall site’s solar panels.

Customers, Deadman said, are already feeling nervous about the incoming recession, and scaling back orders in quality or quantity.

According to Perring, shaken consumer confidence may be the last thing printers need: “That’s what recessions do - that disposable spending is reduced.

“It’s really not an exaggeration to say our industry is contending with a set of factors it has never in the history of the industry had to cope with.”

Adding to companies’ financial woes is the Bank of England’s increase in the interest rate.

The printing industry is largely saddled with debt taken on to survive the pandemic - and while many printers managed to get interest-free loans, such as the CBILS, a significant number were either ineligible, or had to take on extra debt besides to survive the pandemic, Perring said.

Any interest rate hike, therefore, means repayments suddenly become more expensive.

The combination of all these pressures, he added, meant that many printers are unable to reduce their costs any further.

“They’re in the trenches every day, fighting to get business in and deal with all of these different cuts. I don’t think they have the capacity to do any more.

“We are a very adaptable industry, but adaptation has a limit.”

There may yet be cause to be optimistic, however, according to Perring.

Pre-pandemic, he said, the industry had returned to growth after a prolonged struggle with the west’s digitalisation. Certain sectors, such as direct mail, personalisation, high quality or large-format prints, and packaging, were seeing real growth.

“The positive thing is: print can grow again. There was genuine positivity to be had for entrepreneurs and existing businesses to seize on — we just need a break in this continuous pressure cycle.”

The IPIA has therefore decided to go to the government for support.

“You can’t leave the fifth largest industry in the UK on its own.

“We’ve already started to reach out to our members to ask them to send us impact statements, and what help government could provide to tangibly alleviate some difficulty.”

The IPIA then plans to work with the other print associations to pool their findings before bringing a report to government and make a conclusive case for a support package.

“If you can make a strong and articulate enough case to them to prove the economic damage [of not helping print]. That tends to concentrate minds.

“I don’t know if we’ll be successful, but we’ll have a very, very good crack at it.”

Perring encouraged any willing printers to get in touch with the IPIA to discuss the current economic difficulties, and what any support package might look like.