News

An old Italian saying from the pre-Renaissance era assures us that "the gloom of the world is but a shadow and behind it, within our reach, is joy". Indeed, there was much to be gloomy about in 14th-century Italy. It was a land of famine and disease, of war and revolt. Joy was, however, within its reach and with the advent of the Renaissance, came untold riches, the rise of humanism and spectacular cultural achievements.

To draw comparisons with the print industry will no doubt raise some eyebrows, but the latest, and last, BPIF Directions survey reflects both the gloom in the present and the optimism in the future that this old saying encapsulates. The gloom is, however, currently more evident than the optimism. Indeed, of the 90 respondents, 41 said that the last quarter was poorer than expected. One company could not respond as it was closing and economist David Ross, the author of the report expressed serious concerns as to the future of some of the others, asking if they will still be around in 2009. But are these closures a double-edged sword and is the optimism well-founded?

Sound fundamentals
With the dismal summer at an end, many will be breathing sighs of relief and order books will be filling up in the run up to Christmas. Without wanting to echo the words of the hopelessly blind optimists in 1929 America, the fundamentals of many areas of the print industry are sound. This view is supported by the Directions finding that a positive balance of 11 (see box for explanation) intend to invest in new plant and machinery in the coming quarter.

The results echo the raft of news of new kit investments by printers. Among others, Dorchester-based Advantage Digital Print (ADP) has just bought the UK’s first iGen4 (see page 15) and is intent on bringing transpromo to smaller markets; ImageData has just completed its £6m investment in a new site and raft of new kit and last month Boxes Prestige shelled out on two seven-unit Manroland presses. There is sense in investment despite the difficult conditions.

Ross says: “Investment is a necessary strategy as companies who do not spend will be left behind. Prudent investment also improves efficiency and enables companies to take out costs. Overwhelmingly, print companies will replace equipment with more efficient, time-saving kit, rather than to increase capacity.”
Indeed, the survey reveals that margins are expected to improve in the coming quarter largely thanks to staff cuts – an ominous finding for the general economy – but also by efficiency improvement. In anticipation of this, 32 of the 90 respondents said that they thought they could improve margins over the next three months.

Positive balance
Herein lies the roots of optimism. Across the board, many of those surveyed were looking forward to the next three months with confidence, with a positive balance of 59 predicting an improvement. The weakening pound is boosting exports and none believed that export prospects would worsen over the next three months, with just under half predicting an improvement. As the busier winter period nears, many predicted a successful quarter, with a positive balance of 64 believing that the volume of output will improve over the next quarter and a positive balance of 63 expecting domestic orders to pick up.

Ross adds that he was surprised at how many printers openly said they were seeing the benefits of the spate of closures in the industry. With tens of millions of pounds of capacity taken out of the market in the summer alone, it is clear that there will be some benefactors. He also predicts that the economic gloom may, in the short term, encourage retailers to send out advertising. Indeed, not all print clients are preparing for a Christmas downturn. Many publishers, such as Guinness World Records are producing record runs in anticipation of an upturn in demand (see page 21) and printers will naturally reap the benefits of this trend. However, Ross believes that it is after Christmas that the true consumer crunch will come.

Up to the challenge
“Utility bills have already soared and the full effects of this will not be felt until after the Christmas period when bills start landing on the public’s doormat,” he says. “We are not in the same position as the early 90s when inflation was through the roof and unemployment was endemic but the outlook is very uncertain.”

These are indeed uncertain times for the print industry and Ross points out that on many occasions the optimism of the previous quarter is dashed by the results of the next. However, Directions suggests that joy is within reach and the continued investment shows that much of the industry is standing up to the challenges it faces.

DIRECTIONS METHODOLOGY

A balancing act
Balance is the measure of mood with the percentage of respondents predicating an improvement in conditions subtracted from those predicting a downturn. For example, if 48% predicted the trade would improve and 20% that it would worsen, there is a balance of +28

Results in brief
• Improvement in trade (in next quarter) +59
• Improvement in domestic orders +63
• Increase in domestic prices +32