Of course, this is a simplistic view of how the world works. But nevertheless, a lack of certainty can become a spiralling descent into negativity.
So, two years after the last pandemic restrictions were lifted, a similar timespan from the start of the Russian invasion of Ukraine, 20 months since inflation started to spike, where are we? How does the print sector view its future?
Printweek spoke to three industry stalwarts to find out.
Eight Group
Eight Group CEO Lance Hill says business is good, but consistent with the same period last year; the company normally sees a quieter first half compared with the second half where business ramps up.
State of play
He explains that Covid was an unusual spike for the firm, “but in a positive way due to our pharmaceutical and healthcare client base”. He adds: “But when you strip out the two years where it affected our revenues, we are still up on pre-Covid sales.”
That said, he says that there is “a mixture of decline and growth within that difference, shortfall primarily being made up by new business wins, whereas the decline is down to reduced activity from existing customers – but we have not lost any customers”.
Hill says the group’s recent acquisition of Marketlayer “is the beginning of our strategic plan to broaden our offering alongside print, covering creative, email and digital marketing, data services plus more consultancy from the Eight Plus team”.
Notably, he says that it is likely that the company will invest more in digital print over the next 12 months; this may require further ancillary finishing equipment. As Hill comments: “We are investing significantly in workflow and back-office efficiency at the moment, as this is an area we have not focused on enough in the last couple of years due to our tripling of turnover in the last four years.” However, despite the investment plans, Hill doesn’t envisage an increase in staff.
The economy and politics
On how the recession played out for Eight Days, Hill is bullish. He says: “‘Recession’ is just a word that sparks panic into people unnecessarily. Whilst it might be stating a fact, in the real world of my business it changes nothing; the foot is always on the gas regardless of how hard or easy trading conditions are.”
Hill is pessimistic that the recent change of government will lead to a significant improvement in the economy; he emphatically states that he has no confidence in any political party: “They are like bad salespeople: talk a good game but deliver very little or nothing.
“As long as I can remember every election manifesto has talked about sorting the NHS, and yet it has consistently got worse regardless of who is in power. Now it’s about net migration.” He’s of the view that no amount of money will seemingly fix either problem and that, in his words, “the government needs a Pep Guardiola”. For the record, he’s not a Manchester City fan.
Hill tries to be fair when saying that he’s seen some good ideas put forward by politicians. However, he says that “rarely do they come to fruition, with one exception that springs to mind: the Kickstart scheme during Covid”. For him, this “was a great idea, and one that worked for us as we still have the two great trainees we took on via that scheme”.
Fundamentally, Hill is of the view that “politicians are salespeople and are only focused on their own constituency when it counts; they need to get out and talk to more businesses and understand the various challenges”.
He carries on to say that he’s been to Downing Street for a meeting with a special advisor as part of an IPIA group. As he says, “it was a great experience, but I’ve not seen any follow-up to that conversation yet in terms of what can the government do more to support the print and paper industries”.
Prospects for growth and the economy in general
Like everyone else in business, Hill craves constancy and says that until there is global stability – referring to Ukraine and Gaza – “the economy will stay flat with very little growth.”
On the question of Europe and whether the UK should seek to rejoin, he corrects the question, noting that “the UK did not leave Europe, we left the EU, and that is a big difference. I voted for Brexit and would do it again tomorrow.” He says this not because he’s anti-Europe – he’s very much pro-Europe. However, he says that he is “very,” emphasis on that word, “against being governed by Brussels”.
Cost pressures are a significant concern for Hill. He states: “A simple year-on-year analysis of our cost base tells me we are paying a lot more for utilities, rates, etc. Our margin was affected last year because of this, and also market price pressure – postage and paper costs going up really put strain on our channel which is understandable from our customers’ perspective, they have to spend their budgets wisely.”
Despite cost concerns, Hill states that in general payment times are good. That said, he’s had “a few clients push out a bit further than ideal, but we have supported them to trade out of their difficulties which, he says, pays off in the long term”. He makes the point that “if someone wants 90 days terms then they can go somewhere else”. That said, he comments that “even large corporations can cause frustration, but it’s never a big problem”.
It’s pertinent to note that Hill describes Eight Group as “a cash-rich business,” not requiring much finance and so has little to do with the financial markets.
He seems sanguine in terms of interest rates, saying that he thinks interest rates will eventually come down but “it will be slow and steady, which hopefully will help businesses that need to borrow”.
Hill’s business confidence
So how does Hill feel about the future? In summary – positive.
As he says: “The economy and sector could be on its knees, but I’d still be confident. That might sound arrogant, which it isn’t meant to, but like the word ‘recession’ you can talk yourself up or down when focusing too much on outside factors you cannot control”.
He says that the company very much “focuses on its own destiny, which means I have a very motivated team”.
Jamm Print & Production
Liz Shackleton, managing director of Jamm Print & Production, says that business has been “a bit of a roller-coaster ride” in recent years – what with Brexit and Covid, both of which affected the company: “We lost money and had to rebuild sales once the country started to re-open.”
However, she is looking to this financial year being the start of the company’s recovery.
A double blow
In her experience the impact of Covid on printers was staggering: “So many sectors had to simply shut up shop, and the knock-on effect for us was significant; like so many other companies we are still recovering from the shockwave.”
Jamm has a significant number of customers in Europe. As a result, Brexit – followed by the Covid pandemic – knocked the company for six, Shackleton says. In the run-up to the UK’s departure from the EU, Jamm had set up a subsidiary in Europe to handle work there. However, she says “almost as soon as it was established and work transferred to ensure we would not lose our European client base, there it was: Covid, and all the hard work we had put in was threatened.”
But the company didn’t falter. Says Shackleton, “we did maintain our European clients, and have added to them in the years since 2022. We are still feeling the effects, but the signs for future stability are good, and we are able to make plans.”
Going forward
Like other printers Shackleton is looking at the future of the printing industry in general and her client base in particular. She explains that the company is heavily involved in the not-for-profit sector, providing services including direct mail and knows that the move to online fundraising is going to escalate over future decades. “We are investing,” she says, “in developing new services that we can add to our current offering. We’re also looking at the ways we can maximise the use of our building to bring down operating costs.”
In her view, the future back in 2022 was imperilled by one rather brief government. On this Shackleton remarks that during “the thankfully short tenure of prime minister Truss we were staggered by how quickly the implications of government decisions were landing on our doorstep”. By this she explains that Jamm was building its business in Europe, and the pound crumbled – “it cost us a lot more than we had budgeted”.
And the allied ongoing need for support to help the recovery from the double-whammy of Brexit and Covid was made more important as “borrowing became so very difficult for small companies, and so expensive” she says.
On politics
Shackleton isn’t really sold on the merits of either of the two big political parties; in terms of the impact of the general election, she’s mostly just pleased about the extra work it has brought the printing industry “with all the paperwork it generates!”
But on the matter of politics, while Shackleton’s southeast London business has “a lovely and loyal workforce”, they are struggling. “They’re working hard, but finding housing difficult, childcare almost impossible, and the cost of living crisis really should not be affecting people who are working as hard and regularly as my staff are – but it really is.” She’s found that staff absences are affected by how long it takes to get an appointment with the GP, or treatment for conditions that need hospital appointments.
On top of that Shackleton comments that staff that commute to work are finding their transport arrangements are becoming more unreliable and that’s affecting the company: “If it takes two to run a machine and one of them is stuck on a train station waiting for the third train after two cancellations, we can’t run our business.”
She thinks, and expresses this clearly, that “although it is very tempting to ask political parties to prioritise lower taxes for working people and companies, that isn’t going to fix our crumbling infrastructure or help us get to net zero – and we simply have to do that.”
Shackleton accepts that becoming more environmentally friendly “will be hard”, “will be messy” and “will be expensive”, but thinks that there is no longer a choice. “Any political party that is serious about being the party of business has got to accept that, and put in place policies to help companies like Jamm to become part of the solution. At the moment I’m not seeing much evidence of that.”
Europe matters still
Shackleton says she would welcome “hearing the two main parties talk meaningfully about improving relations with our nearest trading partner – the EU.”
She says that “I’m an absolutely died-in-the-wool and unrepentant Remainer. I find it difficult to understand why any country should decide to inflict on itself the sort of damage that Brexit has caused. But we did.”
Shackleton is emphatic when she says that the new Labour government should surely see as a priority “building better relations with the EU, and removing the barriers to trade that are really starting to bite us on the backside now.” Equally, she hopes that the EU will not be too badly damaged by recent results in the European elections, and that in the not too distant future rejoining will be an option for the UK.
The future
Finally, looking to the future, Shackleton is confident. And she says this because Jamm has been able to build on its work in Australia, Europe and recently the US.
Doing this, says Shackleton, “has most certainly given us a hopeful perspective – we do feel confident that we can complete our recovery and start to build the business in the next few years. Lower interest rates and an end to the cost-of-living crisis would help, though!”
BPIF
Kyle Jardine, economist and Northern Ireland manager for the BPIF, explains that he has to be neutral when talking about politics; as such he doesn’t want to talk about the performance of the Conservative government nor the potential impact of the new Labour administration when giving his overview of the world of print.
The current position
However, that doesn’t stop him pointing in the direction of the latest issue of the BPIF Printing Outlook. As Jardine says: “It monitors and charts the performance of the print sector in terms of industry turnover, number of companies and employees.”
In summary, it found that “the UK’s printing and printed packaging industry has performed positively in terms of output and order growth in Q1... more companies increased, than decreased, employment levels in Q1” and that “a majority of printing companies were able to hold margins steady in Q1, but margins remain under increased pressure.”
But in terms of levels of investment, Jardine points out that printing companies have been struggling somewhat with investment in recent years as a result of Covid, debt and higher interest rates.
However, the BPIF has also observed some companies found themselves to be in stronger position to consider their investments this year; and “investments related particularly to sustainability, net-zero and energy efficiency initiatives are attracting significantly more attention”.
The BPIF wish list
The BPIF’s ‘election manifesto’ set out what it wanted to see from the new government, it also points out how important the printing sector is to the economy and as an employer.
“With a turnover of £13.7bn, a gross value added of £6.5bn and almost 100,000 people in over 7,000 companies, the UK printing industry remains integral to the country’s employment performance and economic growth,” outlines Jardine.
He sees print businesses, the majority of which are SMEs, “working hard to reach environmental targets, train a new generation of young people, and invest in productivity and sustainable growth.” Interestingly, the manifesto says that “while the last parliament has seen difficult years for UK industry, the resilience and adaptability of our sector has shone through... we are perfectly positioned to support the next government’s drive towards economic growth that serves both people and planet.”
But for Jardine, print nevertheless needs the new Labour government to be committed to supporting sectoral growth; he’d like the government to listen carefully to print, and manufacturing more widely, “to appreciate its contribution, and to recognise the support it needs to build on its success”.
The economic outlook
Jardine wouldn’t be pressed on his views for the prospects for growth and the economy in general or on whether the UK should seek to rejoin Europe. However, he did discuss the cost pressures for print and whether they were abating and what else the sector is telling the BPIF.
He points out that labour costs remain the most prominent cost concern for companies, but that “there are signs that pressure is building for other cost increases; more companies are now starting to see a return of paper price increases”. In fact, when it comes to company plans to increase profitability in the next 12 months, cost control is still the centre of focus – as it has been since July 2023. That said, Jardine comments that “a majority of printing companies were able to hold margins steady in Q1”.
Finance matters
On to the subject of finance and payments and Jardine reckons that the most significant changes in relation to finance is – and to be fair, this affects most organisations – the increased costs of finance along with increasing levels of late payment and bad debt.
Notably, Printing Outlook found 29% of respondents had an ‘excellent’ cashflow position, the same as in January 2024 and up from 18% in October 2023; 38% were in a ‘good’ position, down from 46% in January. 25% had a ‘normal’, but limited buffer, up from 19% in January; 7% described their cashflow position as ‘poor’, with no buffer, up from 5% in January. But worryingly, 2% described their position as ‘terrible’ with payment and financial viability issues, up from 1% in January.
On current interest rate policy and its effect on economic growth, Jardine said that “many businesses would have preferred that the Bank of England’s Monetary Policy Committee had already started the process of cutting interest rates”.
However, as he comments: “The committee’s voting pattern has become less hawkish, and more dovish, and there is a general expectation that interest rates will be see several cuts over the second half of this year.”
Fundamentally, Jardine takes the line that “interest rate cuts will encourage more business investment and stimulate consumer spending – both of which should boost the UK’s printing industry”.
And this could lead into increased bank lending, a point also noted in the Printing Outlook. It reported that bank lending remained at the same level in the past 12 months for the vast majority – 87% – of respondents. It also found that as the Bank of England increased interest rates so 54% of companies reported that the cost of borrowing increased in 2023.
Confidence levels
So, on a scale of 1 to 10, 1 being negative and 10 being positive, where does Jardine place the sector’s business confidence?
In answering that question he refers to the BPIF’s data, as set out in Printing Outlook, which has found that “the UK’s printing and printed packaging industry has performed positively in terms of output and order growth in Q1, though lacking any dramatic improvements. However, the confidence outlook has undoubtedly taken a step up for Q2 – and orders and output are expected to grow more strongly.”
This for Jardine means – as he puts it – “that, using your scale, confidence would have scored a 5 (neither negative nor positive) for Q1, but moved to a 6 for Q2.”
Summary
Different standpoints invariably give different responses. But one thing that does emerge from these three industry players is that there is a firm belief in the future and a positive mindset doesn’t do any harm.
