Serving industries as diverse as the retail, e-commerce, food, electronics, medical, automotive and aerospace sectors, Macfarlane Group has a pretty broad view of the economy. As the supplier of packaging used to ship its customers' goods, the company's fortunes are a pretty reliable indicator of business momentum in the UK.
Although Macfarlane has a growing business in Europe, the UK and Ireland still account for about 85% of the Glasgow-based group's revenues. And according to chief executive Peter Atkinson, demand is weak across the board.
The company said today that it managed an increase in revenues and pre-tax profits in the first half of this year, with the latter 13% higher at £10 million. The group benefitted to an extent from the recent acquisitions of Cambridgeshire-based Suttons and Manchester's Gottlieb, but its resilient performance owed more to its success in negotiating lower prices from its paper and packaging suppliers.
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“All sectors are generally weak, but probably the area that is weakest is the e-commerce sector and the home delivery sector, and that represents around 25% of our revenue in our distribution business," Mr Atkinson said.
"That is really coming from the spike that we saw in 2021 [when] the sector was very strong because of Covid. Clearly what we are seeing now is a return to more normal retail conditions, and the e-commerce sector is coming back from a very high level to a more normal level.”
That said, Mr Atkinson also acknowledged that the cost-of-living crisis is bearing down as well with consumers spending less on non-essential goods. The key question is how much current economic conditions are weighing, versus the dampening effect of the pandemic hangover.
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Meanwhile, industrial demand is holding up better than that of retail, but this is still "not as strong as we would like it to be".
The overall outlook isn't one of doom, but the landscape is far from inviting. Mr Atkinson says Macfarlane isn't anticipiating any significant pick-up in demand until next year at the earliest, which chimes with the general consensus that the UK economy is set for a sluggish recovery.
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