10 minute read
What the data tells us Business outlook
from Widthwise 2022
How was it for you? The past year has presented its fair share of challenges but the results of the 2022 Image Reports Widthwise survey suggest that it was much less of an annus horriblis than 2020/21. That may explain the relatively rosy outlook shared by most print service providers (PSPs) in the UK and Ireland: 73.63% are optimistic about their business over the next two years. That view is underpinned by the fact that almost two out of three (66.17%) expect demand for wide-format print to grow over the same period, with only a pessimistic 9.49% believing it will shrink.
As upbeat as all that may sound, the survey also makes it absolutely clear that the sector is not out of the woods yet. More than four out of ten companies (40.30%) say their margins have decreased since the beginning of 2021. And very nearly the same proportion (39.80%) say their turnover has shrunk by more than 10% over the same period. That is a dramatic improvement over the year before - when 64.62% saw their revenues fall by 10% or more – but it does suggest that the industry is still not back to business as usual.
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There is evidence of a growing performance gap between PSPs. While four out of ten are still struggling, 26.37% of companies report that their turnover has grown by 10% or more and 20.40% say their margins have increased over the past year. There was a significant, albeit hard to qualify, reduction in print capacity when the British economy went into total lockdown and this may have benefitted some of the survivors.
Looking ahead, 55.72% say that growing their business is top of their agenda while 14.93% are focusing on finding new markets. Reducing costs is top priority for 11.44% of respondents which reinforces the view that printers are pretty bullish about the future but may also reflect the drastic cost cutting that has occurred across the sector in the past two years.
Q4. How has your total turnover changed since the start of 2021?
Decreased by more than 10% Increased by more than 10% Stayed about the same Increased by 1-10% Decreased by 1-10% 39.80% 26.37% 12.94% 10.45% 10.45%
Q5. How have your large-format print margins changed since the start of 2021?
Q6. Which of these sectors is now the biggest provider of revenue for your business?
Retail Manufacturing Events Local Govt. Education Construction Entertainment Hospitality Medical Other 30.35%
It is worth noting the global context in which the wide-format sector in the UK and Ireland is operating. Global economic growth this year will, the World Bank predicts, be 2.9%, just over half what it was in 2021. The British economy may do slightly better - growth forecasts vary between 2.8% and 3.8% - but could also do significantly worse due to the disruptive influence of industrial unrest, energy prices, food inflation, fragile consumer confidence and the possibility, which we are all resolutely doing our best to ignore, of a resurgence/new variant of Covid. In other words, this is exactly the kind of year that the great American economist John Kenneth Galbraith had in mind when he remarked: “The only function of economics is to make astrology look respectable.”
As the wide-format sector derives so much of its revenue from the marketing sector, it is encouraging to note that leading media agency Zenith expects the global advertising spend to increase by 8% to $58bn this year. The UK’s ad spend is forecast to do even better than that, growing by around 10.7%, with outdoor advertising budgets predicted to rise by 31.5%. The less encouraging news is that the growth in UK advertising spending is forecast to plunge to 5.4% in 2023. Still, slow growth is better than no growth.
Against that backdrop, the British wide-format industry has performed creditably - even more so when you reflect on the many obstacles it has faced - and still faces. Almost eight out of ten (79.60%) have experienced supply chain disruption in the past year. An even greater concern - a serious worry for almost nine out of ten (88.56%) respondents is the soaring cost of supplies. The double whammy of price increases and lack of supply continuity is likely to hamper printers for the rest of
Q7. How do you feel about your business over the next two years?
Mildly optimistic Very optimistic Neutral Mildly pessimistic Very pessimistic
4.48% 1% 42.29% 31.34% 20.90%
Q8. What type of wide-format print are you currently involved in?
General banners/flags/signage Posters Exhibition and display graphics Transport graphics Window graphics Retail/POP/POS Billboard/outdoor advertising Wallpaper/murals Floor graphics Building hoards/wraps Fine art/photography Packaging Textile printing for garments Cardboard engineering Textile printing for banner/flags Industrial speciality (ceramics, metals etc) Textile printing for home/interiors Furniture Other 32.84% 27.36% 27.36% 24.38% 20.90% 20.40% 18.91% 8.46% 8.46% 7.46% 4.98% 4.48% 2.49% 1% 0% 1% 55.72%
86.57% 81.59%
Q9. What wide-format print applications will be most important to you in the coming two years?
Exhibition and display graphics General banners/flags/signage Transport graphics Retail/POP/POS Wallpaper/murals Fine art/photography Posters Billboard/outdoor advertising Textile printing for garments Textile printing for banner/flags Industrial speciality (ceramics, metals etc) Window graphics Building hoards/wraps Packaging Textile printing for home/interiors Floor graphics Furniture Cardboard engineering Other 7.96% 22.89% 22.39%
18.41%
Q10. What is the order of your priorities for the next year?(Rank 1-6, 1 being the most important)
Grow turnover Enter new markets Reduce costs Find new customers Sustainable practices Acquisitions/mergers 14.93% 11.44% 6.97% 6.47% 4.48% 55.72%
this year with some analysts hinting that the situation will not stabilise until the beginning of 2024.
Steeply rising energy costs are an issue for the vast majority (81.09%) and 48.26% are fretting about the state of the British economy, an anxiety they share with chancellor of the exchequer.
If it’s any comfort, the investment bank Goldman Sachs says the British economy could return to some kind of normality next year. The caveat there being that by ‘normal’, Goldman Sachs means anaemic growth. The risk of a recession in the US, still one of the engines of the global economy, is a cause for concern too.
On a more upbeat note, it is encouraging that 14.93% say one of their greatest problems is retaining or recruiting staff. It was hard to gauge the level of enthusiasm within the industry for Brexit when the referendum was held six years ago but few now seem to regard it as a cause for celebration - only 6.97% expect it to have a positive impact while 40.80% say it will hurt their business in the medium- to long-term. Whether this change in geopolitical strategy will pay off for UK Plc in the long-term remains a moot point.
The 2022 Widthwise survey does suggest that the triple whammy of pandemic, lockdowns and economic shocks has prompted many PSPs to reappraise their business. In last year’s report, 45.64% of respondents said they had restructured their operations. In the latest survey, more than one in four (27.36%) have done the same, while 26.37% researched new markets and 24.88% offered new print solutions. The priority next year is improving workflow - the principal target for nearly one in two (49.25%) PSPs. That change of focus suggests that the industry may be getting back to something approaching stability.
The cliche ‘the new normal’ is less popular than it was this time last year, partly because we have belatedly recognised that we don’t know how much of what we are experiencing is genuinely new or, indeed, what is - and will be - normal. That said, it appears that, for the foreseeable future, the new normal in the wide-format industry in the UK and Ireland is to keep your powder dry when it comes to investment. Although 66.17% of respondents expect the market to grow over the next two years - with 9.45% believing it will shrink - 58.21% do not plan to buy a new wide-format digital printer in the next two years.
In part, this is an understandable response to chronic uncertainty about the UK’s economic prospects, but it also reflects an industry-wide consensus that there is no technological breakthrough on the horizon that will provide them with a compelling competitive advantage. If anything, the spur for capital investment may be sustainability. This cautious attitude may frustrate suppliers but, in the circumstances, it is perfectly understandable. The business cliche that if you stand still you’re dead is overhyped. Making bad decisions quickly is not a recipe for success. The volatility of the present market is reflected in the fact that 21.89% of PSPs said that speed of turnaround was their customers’ top priority, more important than service (11.44%) and not far behind price and quality (30.35%).
Although an enterprising minority of wide-format printers are exploring new markets and new applications, the industry’s core markets have remained pretty constant over the years - 86.57% of those surveyed produce general, flags, banners and signage, while 81.59% supply exhibition graphics and signage and 55.72% make posters. One of the more intriguing shifts is that more printers are now involved in transport graphics (32.84%) than retail signage and POS (27.36%). It is hard to know whether this is a blip,
Q11. Have you made any of these strategic changes within the past year?
Q12. Do you plan to make any of these strategic changes within the next two years?
Restructured the business Researched new markets Offered new print applications Improved workflow efficiencies Invested in e-commerce Offered new non-print services None of the above 27.36% 26.37% 24.88% 21.89% 12.44% 8.46%
30.35%
Improve workflow efficiencies Offer new print applications Research new markets Invest in e-commerce Restructure the business Offered other new non-print services None of the above
17.41% 16.42% 13.93% 11.44% 9.45% 15.92% 49.25%
Q13. Over the next two years do you expect the UK’s wide-format print market to…
Grow Stay the same Shrink 9.45% 24.38% 66.17%
Q14. What do you think your clients’ main priorities are? (rank 1-7, 1 being the most important)
Price Quality Speed of turnaround Service Environmental issues Latest technology Installation 30.35% 30.35% 21.89% 11.44% 4.98% 1% 0%
Q15. What are your three biggest concerns for the business in 2022 and beyond?
Cost of print supplies Energy costs The UK economy Cashflow Print prices Staff recruitment/retention Environmental regulation New entrants to wide-format market Covid/Further lockdowns 32.84% 22.89% 14.93% 5.97% 3.48% 1.99% 48.26%
88.56% 81.09%
Q16. Have you experienced supply chain disruption to your business over the last year?
Yes No 20.40% 79.60%
Q17. Do you think, in the medium to long term, that Brexit will prove…
Have little impact Bad for your business Good for your business 6.97% 52.24% 40.80%
reflecting the travails of the retail sector during the pandemic and lockdowns or an enduring trend.
Supplying different kinds of print to the retail sector is the most important source of business for 30.35% of respondents and it is possible that, when inflation drops from its current historically high level, there will be more growth to come in this market. Shops were collateral damage during lockdowns - as, for that matter, were exhibitions - and it is estimated that, for example, more than 8,700 chain stores closed in 2021. The rate of closures has since slowed but some well-known names - such as H&M and HMV - are still shutting outlets which may diminish the sector’s appetite for print.
The wide-format sector’s optimism about the future may boil down to a belief that, after the existential crises of the past two years, the only way is up. After a period when it was impossible to look even days into the future, it is now possible for PSPs to begin to plan, albeit cautiously and in the sure and certain knowledge that there will be further shocks ahead.
It was, after all, less than a decade ago when many print companies began to worry that print would be completely replaced by the screen. That fear has diminished somewhat, especially with some media commentators talking of a ‘digital fatigue’. The situation the British wide-format sector finds itself in today could best be described as serious but not hopeless - and for that, after all the recent turbulence, many print service providers will be profoundly grateful.
