The latest Packaging Federation UK Market Report highlights the extent to which rising energy and raw material prices are hitting UK converters, a problem compounded by the fact that their “relatively weak” supply chain position makes it difficult for them to pass on rising costs.
“Competing in the 21st century” also questions the role of the UK's Department of Trade and Industry (DTI) and its relevance to manufacturing industry.
The report, providing a snapshot into areas ranging from environmental pressures to globalisation's growing impact, says energy costs now contribute twice as much as they did in 2005 to UK packaging manufacturers' overall overheads, accounting for anything from 7-22% of the mix. Meanwhile raw material costs now account for between 20 and 75%.
To be discussed with UK MPs on November 1 in the House of Commons at the AGM for the All-Party Parliamentary Group for Packaging Manufacture, the report emphasises, furthermore, that the ability of converters outside the UK and especially in Asia to obtain their raw material and energy more cheaply is driving UK investment away.
An accompanying commentary from research partners Landell Mills Consulting says globalisation has led to a “general polarisation” of the UK packaging industry, which now largely comprises three tiers - large global players headquartered in the UK, subsidiary operations of such companies headquartered outside the UK, (some of these still manufacture or sell/distribute from the UK), and a large number of small niche players, new start-ups, MBOs, sales agents and importers focussing principally on the domestic market. Unsurprisingly there has been an overall decline in UK packaging manufacture and jobs “in favour of lower labour cost locations in Eastern Europe and Asia in particular.”
Ian Dent, Packaging Federation ceo, says: "What was patently obvious in undertaking this review was that while the industry has forged ahead, and taken appropriate action, such as the creation of the Affiliate structure, to make for a more cohesive voice to the Government as recommended, this was not matched by any positive action from the DTI.
“What we need is a Department for Trade & Industry, not as now named, a Department of Trade & Industry, which works with and for industry, rather than the current model, which sits back and waits for manufacturing industry to be on its knees before taking notice, let alone action!”
Key recommendations suggested in the report include:
o a call for more “joined up thinking” on regulatory issues and a review, particularly, of the UK Climate Change Levy and Integrated Pollution Prevention Control legislation;
o a call to identify sector skill requirements more clearly;
o continuing efforts to offer open platforms for debate with MPs and to produce reports and studies with the supply chain;
o greater liaison with Regional Development Agencies to promote packaging manufacture as a recognised priority sector;
o continuing lobbying for an improved interface between the sector and government, with the appointment of a DTI “packaging champion”;
o further liaison with the DTI on the sector's involvement with RFID;
o continuing monitoring and reporting by the Federation and its affiliates on key market statistics and data
o ongoing efforts to establish a sectoral sustainable development strategy;
o further work to “benchmark” the UK packaging industry over a range of key performance indicators.
The UK Market Report can be downloaded free from the Federation's website: www.packagingfedn.co.uk
