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 material and service prices 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. The industry needs to have more confidence in itself."

That view was echoed by BPIF director of corporate and external affairs Cicely Brown who said: "Spare capacity will provide an extra factor in the pricing equation. However, any price cutting mentality should be soundly challenged if we are to stand any chance of improving the industry's unacceptably low margins in the medium term."

But Ross admitted that 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 for the next quarter, trade at the end of 2004 either improved or remained the same for 89% of respondents.

Directions findings

* 58% of firms worked below capacity
* Trade improved or remained the same for 89% of firms
* 38% of respondents believe margins will improve on 12 months ago
* 29% of respondents think margins will be poorer

Story by Philip Chadwick