6 February 2025

POSITIVE Q4 OUTPUT AND ORDERS GROWTH IN-LINE WITH FORECAST – BUT A NOSEDIVE IN CONFIDENCE HAS DEPRESSED EXPECTATIONS FOR Q1

Output and orders in Q4 more-or-less performed as forecast as the UK's printing and printed packaging industry continued its path of steady, but subdued, growth in 2024 - according to the latest BPIF Printing Outlook survey.

As reported last quarter, the output, orders and confidence data reported for Q3 was the most positive for two years, in Q4 output and order growth continues pretty much as forecast. However, business confidence slipped in Q4 and subsequently order and output expectations for Q1 have flatlined; and confidence into Q1 has nosedived.

VOLUME OF ORDERS - ORDERS GROWTH JUST BELOW FORECAST IN Q4

The orders balance of +16 in Q4 was just below the Q4 forecast (+18). A balance of +1 is expected for Q1.

Industry performance had been slowly but steadily improving throughout 2024 - what has changed? Well, the responding comments to the Printing Outlook survey suggest that the negative economic sentiment coming from Government, the additional employment costs, and mounting regulations and administrative burdens on businesses have all played a part. Wage pressure has become the most serious business concern, demand is being held back, competition remains fierce, and many companies cannot currently afford to make the investments they seek.

TOP BUSINESS CONCERNS - % OF RESPONDENTS SELECTING

More positively, businesses in the printing industry are still investing, new technologies (such as AI) are being utilised, companies believe they can make improvement to workflow and increase automation, some are achieving healthy profits and growing, cash flow is holding up, output prices have stabilised, as have paper and board costs, exposure to bad debt and late payments has decelerated, and there has been slightly less pressure to accept ridiculously extended payment terms.

TOP INVESTMENT TARGETS - % OF RESPONDENTS SELECTING

The BPIF Printing Outlook Q1 2025 report features sections on industry turnover, business concerns, investment, costs, pay reviews, and much more.

 Kyle Jardine, BPIF Economist, said:

"The was a slow but steady improvement throughout much of last year - so it is disappointing to see confidence evaporate at the start of this year. Wage pressures have become the most critical business concern, and recruitment intentions have been curtailed. Thankfully other costs, excluding energy, have been more stable. Investment remains key, the focus for many companies in 2025 will be on improving workflow and adding automation wherever possible."

Charles Jarrold, BPIF Chief Executive, said:

"Hopefully the dip in forecast for Q1 is only a short-term blip, and it can be turned around. Companies are currently looking to adjust and adapt to Government decisions and searching for a way to invest so they can boost their productivity and increase profitability. If Government can help stimulate business investment, then confidence could quickly turn positive once more."

Wayne Kershaw, National Head of Sales, Production Print, Canon UK and Ireland, and sponsor of the printed Printing Outlook report, said:

"As the print industry continues to evolve, the BPIF Printing Outlook report remains an essential tool for us when identifying key trends that are shaping the future of print, and we remain committed through our partnership and sponsorship of the report each quarter. As we look to the future, collaboration and insight - such as that provided by the BPIF Printing Outlook Report - will be crucial in ensuring a more sustainable, resilient, and forward-thinking industry."

Summary of key findings:

• Forecasts for Q1 are flat, amidst concerns around economic conditions, and what lies ahead.
• The printing industry has experienced a quick turnaround in confidence, a two-year high in Q3 became a two-year low in Q4 - and there are now even worse expectations for Q1.
• Concerns over wage pressures have shot up the ranking list to become the top business concern for printing companies by some way, replacing concerns that competitors are pricing below cost.
• Industry capacity utilisation declined slightly but remained concentrated in the 80-89% range in January.
• More companies decreased, than increased, employment levels in Q4, intentions for Q1 are also negative, this is a significant turnaround from earlier intentions to increase employment.
• A majority of respondents have been able to keep some cost stability in Q4, but there is, with the exception of paper and board, still upward pressure on costs; labour costs continue to be the primary cost concern for companies.
• As expected, labour cost increases in Q4 were less intensive than in Q2 and Q3, average labour cost pressure is expected to intensify in Q1.
• In January, labour costs (direct and indirect) remained, just, the largest cost component with a 32% share, on average, of total costs - the same as in October.
• When it comes to company plans to increase profitability in the next twelve months, manging operations more effectively has held on to its top ranking in January, after surging up the priority ranking in October.
• Only 16% of respondents reported that they had conducted a pay review in Q4, the resulting average (mean) change in basic pay was 4.0%. Almost half (45%) of respondents reported that they will be reviewing pay in Q1.
• Export orders exceeded 5% of turnover for 23% of respondents in January, up from 20% in October, and 12% in July. For these companies export orders performed worse in Q4 than they had in Q3 - export order levels have struggled over the last two years.
• Decisions around investment remain incredibly challenging - extra debt, higher than preferred interest rates, and business costs seem to be restricting the level of investment that companies can commit to. Investment intentions do remain positive, on balance, for 2025 but the level of planned investment appears subdued.
• Almost one-quarter (23%) reported that they were already using AI, up from 19% last year. Another 17% noted that they are currently researching the use of AI, and 27% that they were interested in exploring AI.
• UK consumption of printing papers and boards in Q3 2024 increased strongly compared with Q3 2023 but declined a little in comparison to Q2 2024.

Featured in Printing Outlook this quarter:

• Output and orders - last quarter and forecast for this quarter.
• Business confidence, concerns, and uncertainty levels.
• Turnover - annual and monthly turnover analysis and forecasts.
• Capacity - utilisation and constraints.
• Costs - paper & board, ink, labour, energy, and average cost structure.
• Trend data on employment, prices, costs, margins, profits, cash flow and productivity.
• Profitability benchmarks and plans for improvement.
• Pay Reviews - activity and average % changes.
• International trade - export orders and price trends.
• Investment - key targets.
• Financing and credit conditions - access to finance, late payment, and payment terms
• Consumables - paper consumption and printing ink data.
• Energy - sector update and comment.

The online trading trends survey was carried out during 3 January - 21 January 2025 and received responses from 122 companies employing 8,028 people with a combined turnover of £1.3 billion.