Print and related industries proving to be a resilient sector in transition

The UK economy officially came out of recession earlier this year, but business confidence fell back in the third quarter of 2010 with growth forecasts for the economy distinctly cool for the rest of the year.

The Grant Thornton Business Confidence Monitor for the third quarter of 2010 suggests that the economy is running at more than 4 per cent below pre-recession levels with a fast return to growth by no means guaranteed.

This is a far from supportive context for the printing and related sectors where over-capacity, delocalisation and the import of printed products from low-cost countries, have increased dramatically.

The consequences of these developments for the trading and financial performance of companies in the print and related sectors, and further reductions in the workforce, continue to be a cause of concern for the sector in the UK.

The International Confederation for Printing and Allied Industries (Intergraf) reports that the production of the printing industry in Europe fell by 11 per cent between the beginning of 2008 and the middle of 2009.

In the UK, employee numbers have fallen by around 20 per cent in the last five years and the number of companies operating in the sector has decreased by 15 per cent.

Notwithstanding this dramatic decline, the sector remains an important element of the UK economy.

According to the British Printing Industries Federation, the sector employs around 140,000 employees in more than 10,000 companies. What's more, the sector makes a positive contribution to the UK trade balance and if a manufacturing led recovery is to be realised in the UK, the print sector will have an important role to play in this.

Analysis undertaken by members of the Policy Research Institute at Leeds Metropolitan University suggests that many of the top companies in the region are proving to be remarkably resilient during the first part of the recession. Nine of the top 10 businesses this year were in the top 10 last year.

However, there is a striking variation in financial performance apparent among the Top 50 companies, and while care needs to be taken in interpreting the data away from the specific company context, the analysis provides an interesting insight into the state of printing and related sectors in the region.

About four in 10 of the companies in the Top 50 suggest a year-on-year increase in turnover and one in three report a year on year decrease. While some companies reported substantial increases (ranging from 0.3 to 45 per cent), others reported major decreases (-48 per cent) in turnover.

The difficult trading circumstances and price competitive nature of the market is reflected in both lower pre-tax profits and low profit margins for many of the companies based in the region. While the level of pre-tax profit declined in six in 10 businesses, the majority (nearly nine in 10) traded profitably – some only just.

Determining the factors that lead to success in an adverse economic climate is difficult given the variety of micro and macro factors that impact on business performance. The sector itself is highly diverse and includes companies that range in size from major multinational companies to small family-run businesses.

Nine in 10 businesses in the print and related sectors employ fewer than 20 people. About two-thirds of the companies in the Top 50 companies in the region employ more than 100 people. Among the top 50 companies in the region, about half employ fewer people, and about four in 10 employ more people than last year.

The companies in the Top 50 reflect the diversity of the products produced by firms operating in these sectors and the fragmented nature of the markets served. A major part of their success lies in the competitive strategies they adopt to survive the recession and develop the business.

Paul Robinson, Senior Lecturer in Business and Strategy in the Faculty of Business and Law at Leeds Metropolitan University, suggests that many of the more successful companies are in the short term improving customer relationship management, identifying and moving into new (often niche) markets and investing in new technology.

New ways of working are also becoming a characteristic of the sector with the development of strategic alliances to support diversification and offer more integrated services becoming more prevalent.

In the long term, mergers and acquisitions can play an important role in the survival and development of the sector.

The threats to the sector continue to loom large and the social consequences of job losses as companies go under or "move up the value chain" must be responded to by adopting good practice in managing change in a socially responsible manner.

At the European level, Intergraf are leading a study to identify best practices in socially responsible restructuring for printing companies, and a number of Yorkshire-based companies have taken part in this.

A conference, in Brussels, in November, will provide an opportunity to hear about the findings emerging from the study and present an opportunity to debate the conclusions of the project and its proposed solutions.

There remains, however, a significant opportunity for those willing to be innovative and to create a business focused on customer needs. Hallmark Cards are one of the leading companies in the region who have been able to increase both turnover and profit during the recession.

Louise Hudson, Digital Business director at Hallmark Cards, says: "Hallmark has thrived for more than 50 years in the UK, thanks to a combination of insightful interpretation of consumer needs, best-in-class design capability and high quality printing.

"Although it is one of the leaders in the printing sector, Hallmark doesn't consider itself first and foremost in the 'printing business', but rather in the business of helping people to express themselves."

Jeff Gold, Professor of Organisational Learning and founder member of Human Resource Development and Leadership Research Unit at Leeds Metropolitan University, suggests the need for owners, leaders and managers to pay significant attention to the talent that is already available in the workforce.

He says that small and medium-sized enterprises, in particular, have a fantastic opportunity to shift their work towards higher value-added products and services. To do this, they need to stretch their approach to leadership and management. To make the progress necessary to be successful in a changing environment – mentoring, coaching and learning with peers are the key to unlocking this potential.

A recent analysis in the United States sets a challenging agenda for the development of the sector. In their book, Disrupting the Future, Uncommon Wisdom for Navigating Print's Challenging Marketplace, Joseph Webb and Richard Romano argue that "what will save our industry are fundamental changes in the way we do business.

"It's not just about buying a new piece of equipment, or trying in vain to create demand for print. It's about challenging our assumptions, questioning the conventional wisdom that guided many print businesses in the heyday of the industry, but now is no longer valid and relevant."

The challenges facing the sector are immense; however, technological developments, new markets in places such as India and China and new approaches to conducting business bring new opportunities.

Change is inevitable across the business cycle – how those leading and working in the print and related sectors in the region visualise and proactively respond to these changes will have a major impact on the success of their enterprises and the contribution that they make in the region.

David Devins is a Principal Research Fellow at the Policy Research Institute at Leeds Metropolitan University.