Business

In its interim statement last month, DS Smith revealed that the continued strength of the Euro was proving beneficial to its business. But is this case for the rest of the UK packaging industry?

Tim Corvin, marketing director of Webb Scarlett deVlam, said: "For our London office, the current strength of the euro is beneficial to us when working with our European clients, as the previous strength of the pound placed us at a competitive disadvantage when exporting our services.

"However, with offices in London, Chicago and Sydney, we have to monitor currency fluctuations and market dynamics from a global perspective. The strong euro has not had a significant impact on our business, largely because our multinational clients view their innovation and brand design activities as long-term investments that they must get right by using their most experienced, talented and long-term partners.

"In previous recessions, branding and packaging design consultancies have performed reasonably well as clients tend to pull their much larger media and advertising budgets and look for the better return on investment of improved brand and pack design."

Tim Croxson, operations manager at Croxsons, said:" It's good and bad. From the point of view of glass, there's a shortage of cullet, especially in white glass, and we do import from Europe so those prices are going up.

"However, we source a larger majority of glass from the UK, so there's some protection there.

"Most closures come from Europe, though, so at least everyone is in the same position. The pound's weakness against the dollar is also hitting global companies like ours. In Australia, for example, we have contracts that are traded in US dollars. I can see the pound slipping as low as $1.50 – there isn't much confidence in it at the moment.

"On the positive side, being a globally based company means that we can be flexible and pro-active. The key, though, is to continue to develop strong relationships with suppliers and be open with customers."

Chris Dew, managing director of CPC Packaging, commented: "I doubt it, unless you are a significant eurozone exporter, which has been a difficult path to tread for the UK carton industry in general.

"There are opportunities opening up in Ireland but UK carton converters rely heavily upon imports of cartonboard from Europe. With Scandinavian mills joining the euro exchange rate/inflation 'bandwagon', and with virtually no mills left in the UK, we have fewer and fewer sourcing options from what is, effectively, an oligopoly.

"The weak dollar was providing some relief to allow competitive sourcing from further away – South America and even New Zealand – but shifting board halfway around the world doesn't exactly enhance the carton converters' environmental credentials."

Clive Suckling, global forest, paper and packaging leader at PricewaterhouseCoopers, told Packaging News: "From its most recent peak in February 2007, the pound has fallen nearly 20% against the euro. This has been bad news for millions of British holidaymakers; the flip slide is the general boost it has given UK manufacturers, including packagers.

A broad rule of thumb is that the higher the proportion of costs you incur in sterling in making and selling your product, the more competitive you will be against your euro-denominated rivals – whether at home or in eurozone markets.

There could be a further benefit if you have subsidiary businesses in the euro area, as their profits translate into more pounds.

The boost from sterling weakness is tempered, though, by flattening demand in both domestic and key European export markets. Still, in these challenging times for the British economy, it’s nice to find some good news.