He said: "The government used to give us £1.5m and then give us a list of things they wanted that would cost £2.5m. But that core funding allowed us to do the other things that customers wanted us to do, the obvious one for the print industry is PrintIT!"
He maintained that the popular PrintIT! initiative has enough funding in place to keep it going through 2012. "But we will be more efficient. We can concentrate on what the printers want now, rather than having to follow what the government expects us to do," he added.
"It did come as a complete shock because we are rated very highly in our regular audits and we score well in customer satisfaction. Printers seem to be happy with what we do."
The coalition government changed the way that funding for sector skills councils (SCS) is handed out for 2012, requiring each one to bid in for funding.
Watts said that the funding drop was down to the lack of large companies in the sector.
"The most successful sectors are those that have been promised money by large businesses," he said. "Of course the print industry is one that doesn't have any of what they consider large businesses. Polestar only employs 3,000 staff, they are thinking of the likes of Rolls Royce and Tesco.
"Because of that and the nature of the print supply chain, we don't score very highly under this new way of doing things."
Watts said that the 40-staff organisation would be smaller going forward and it would know more after a board meeting in early February.
He said: "In a way it is good news. No SSC is going to get the funding they got this time around in two years time so what we wanted to do is build a business that is sustainable without government funding, that will have to happen a lot quicker now.
"We had a business plan that relied on some funding; we will have to restructure that business plan. We are financially strong, but we will have to decide what is important going forward."
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