Merchants suffer

Merchants suffer £8.5m in bad debts during first half of year

Members of the National Association of Paper Merchants (NAPM) suffered £8.53m in bad debts from failed print companies during the first half of 2010.

The latest of the association's Quarterly Trend Statistics reports said that bad debts were still being experienced by merchants "at a desperately high level". However, the figure was reduced from £11m for the first half of 2009 and some £6.6m of bad debt for the second half of 2009.

In 2009, bad debts totalled £17.5m - a record year for the industry. This was compared with bad debts in the previous five years, from 2003 to 2007, that averaged £11.3m per annum.

NAPM director Tim Bowler said the association had hoped the first half of 2010 would see a falling off in the number of printing company failures. "Clearly, this has not been the case, with the bad debt total for the first half of 2010 easily exceeding the second half of 2009 by some 30%," he said.

Bowler added that printers have had to operate in an industry with large overcapacity and have had to finance paper price increases, which the merchants have passed on from the mills. He said: "With a third price increase on the way, it would not be surprising if more printers run out of cash in 2010. "However, the incident level of bad debts from company failures in July and August does appear to have shown a quite a slowdown."

The main worry among NAPM members is that the failure rate will once again accelerate towards the end of 2010 as a "second wave" of printers find cash difficult to generate. Bowler said that banks were "unlikely to want to lend more" to an industry that has always been in the top five of risk. He said: "There is no sign whatsoever, despite government pressure, that banks are increasing their lending to the print sector. In fact, the reverse may be true, as banks claw back loans and advances."

Given the continuing low levels of profitability in the majority of the print sector, the poor availability of finance is putting considerable pressures on those printers already struggling to cope with falling demand and rising costs.