Early warning signs for UK label market

At a time when even the most ambivalent are starting to accept that a recession will hit the UK economy in 2008, a new study by industry analysts Plimsoll Publishing has looked at how the UK slow down is already impacting the label market.

The analysis, to be published on the May 1, has drawn on the very latest figures for each of the UK’s top 460 companies in the labels market. The headline findings offer stark reading:

• Almost a third of companies are already showing signs of recessionary behavior, reporting declining sales. This is immediate evidence that the market is slowing down

• Over half of companies have seen their margins fall. Of most concern, over a third of these are currently running at a loss. The pressure on sales has forced an immediate squeeze on profitability. These companies are struggling against rising costs and declining sales

• A quarter have seen an increase in their need for short term finance, a sign that costs are running ahead of cash flow. This is doubly dangerous at a time when banks and financiers are looking hard at their loan books and therefore places these companies in an even more vulnerable position

• As a result, as many as one in six label companies could disappear completely if this trend continues or deepens, say the analysts.

Explaining these results, David Pattison, senior analyst at Plimsoll, reported: ‘We are reading every day how the credit market and the world of finance is been hit, but nonetheless I was still surprised to see just how much the label market is feeling the pressure. I hope this report is recognized as an early warning sign and managers read this and use the findings to steer a course though these tricky times.’

The analysis is not entirely without some good news, some evidence that certain areas, particularly the small companies, with their concentration on local and domestic markets are less exposed to less exposure to the slow down in the market.