After a difficult start to 2023, the economic picture is certainly looking brighter as we move into the second half of the year.
According to the IMF, Britain is no longer expected to suffer a recession this year with the economy predicted to grow by 0.4% this year – a performance that is likely to be better than Germany although still lagging behind other G7 nations.
Wages are continuing to grow across the economy with a 7.2% increase between February and April this year – a record increase over a three month period – and vacancies have also continued to fall.
However, despite an improvement in some of the economic fundamentals, the cost-of-living crisis, high inflation and increasing interest rates means that consumer demand generally continues to be relatively subdued.
Demand in the pallet and packaging sector in the first half of 2023 has certainly been flat although there are undoubted signs of an upturn in the sector as we move into the second half of 2023.
Export challenges
One of the key areas that has a direct impact on the sector is exports and according to a new report by Midlands Engine, the region is still lagging behind the rest of the UK in terms of its overall exports – and has seen the greatest fall of any region following the challenges of Brexit and the pandemic.
The report makes a series of recommendations around how the Midlands can improve its export performance and so hopefully we can see the development and implementation of a coherent regional industrial strategy that will support manufacturers and make it easier for them to sell their products overseas.
Overcoming trading pressures with a best practice approach
The pressures around costs in terms of energy, transport and labour continue to present challenges across the sector, reinforcing the importance of continuing to develop best practice when it comes to production efficiency, sustainable practices and workforce development.
While nationally the number of vacancies is falling, recruitment remains a significant challenge in a number of sectors including in the pallet and packaging sector.
It is almost 12 months since the President of the European Federation of Wooden Pallet & Packaging Manufacturers (FEFPEB) encouraged businesses to ensure they were creating the right conditions to attract the workers they need.
At Nicklin we have continued to develop our production facility in Wednesbury, investing in our workforce with market-leading pay and conditions as well as improving production efficiency through investment in our design and manufacturing capabilities.
Ensuring we are meeting our sustainability obligations also remains at the top of our agenda with our recent £1m investment in a biomass plant and we will be announcing further green investments later this year.
Conflict timber remains an issue
Our commitment to ensuring that we are only using the most sustainable raw materials remains as strong as ever amid concerns that conflict timber from Russia and Belarus is still coming into the UK market.
According to Timber Development UK, illegal imports of Russian birch plywood and other conflict timbers are being smuggled into the market after being falsely declared to have originated from areas across Asia including Vietnam and China.
The EU has also recently adopted legislation that requires companies to obtain due diligence statements before importing wood products to ensure it has not been derived from deforested lands or linked to forest degradation.
Through our own robust chain of custody certification, we can ensure that all the timber we use comes from responsibly managed forests and can be traced back to its source.
Tech & timber advances
As we reported in our Q1 review, forestry values have been on an upward curve in the UK with investors predicting positive long-term growth in the timber market and we are likely to see this growth increase with advances in technology around forestry management.
There has been lots of recent headlines around the growth of AI and this is also likely to have an impact on the timber sector with Sweden’s Linnaeus University currently leading an initiative exploring how AI and the Internet of Things can improve the process of modern forestry.
The aim of the project is to support forest owners use forest resources more efficiently by utilising advanced AI and IoT technologies, improving traceability through the value chain with the goal of achieving more sustainable solutions.
The drive towards a more sustainable approach to packaging generally has seen the introduction of the Government’s Extended Producer Responsibility (EPR) scheme, which shifts the responsibility from households to producers when it comes to packaging waste management.
This has caused significant debate in recent months within the packaging industry with a number of sectors calling on the Government to rethink the scheme in light of the current economic conditions and this was the main discussion point at the recent Environmental Packaging Summit.
However, as things stand it remains important that all businesses understand their EPR obligations and act accordingly.
