A traditionally buoyant pre-Christmas period for printers is to be tempered with increased costs in the first quarter of this year.

Increases in raw materials and services are likely to hamper efforts to improve declining margins.

"Despite activity levels being fine, printers will have difficulty in passing on higher costs to customers," said Directions author, economics analyst David Ross. "Printers should challenge the price cutting mentality and react to the market's other price movements. The industry needs to have more confidence in itself."

Ross admitted that the printers often have difficulty in challenging low prices due to the fierce competition in the market. "Printers always have the danger of losing customers and that is their biggest worry," he said.

New installations coming on-stream and increasing capacity during a slowdown  in the economy would further squeeze margins, according to Ross.

The market was mixed on the issue of margins with 39 out of the 97 printers surveyed believing they would be better than 12 months ago. This compared to 30 who said that they would be poorer, with the remaining 28 stating they would remain the same.

Despite the concerns of the next quarter, the general state of trade at the end of 2004 either improved or remained the same for 89% of respondents, with 11% reporting a worsening of business. Firms working below capacity increased from 48% in the last quarter to 58%, an improvement on January 2003 and 2004.

Story by Philip Chadwick