Despite the impact of the global economic recession in the UK, the packaging industry is expected to witness marginal growth in the forecast period, as demand from the food and beverage and pharmaceutical industries pushes demand for their packaging. The UK's packaging machinery industry will also record growth in the forecast period, driven by exports to emerging economies such as those in the Gulf region, whose demand for food and pharmaceuticals is also increasing. In addition to this, the move towards environmentally friendly packaging in the UK allows the industry to develop new packaging materials and methods.
Moderate growth for UK packaging industry in forecast period
During the review period the packaging industry in the UK witnessed a compound annual growth rate (CAGR) of 4.07% and in the forecast period it is expected to register a CAGR of 3.16% and value over US$20 billion. In 2010 alone, the UK packaging industry was valued at just more than US$20 billion. In the UK, the global economic recession had a large impact and UK gross domestic product (GDP) contracted by 4.9% in 2009, due to a decrease in employment and consumer spending levels. Therefore despite demands for packaged products such as food, drink and pharmaceuticals increasing in the review period, in the forecast period the UK packaging industry will face the challenge of lower domestic demand, as the effects of the recession linger.
Growth will be driven by demand for food and pharmaceuticals
In the forecast period, growth in the UK packaging industry will be driven by the food and beverage and pharmaceutical end-user industries. Of all the packaging consumed in the UK, the food and beverage industry consumes 70%, the pharmaceutical industry 10% and personal care products use around 6%. It is therefore evident that growth in these industries will have a positive impact on the packaging industry. The food and beverage industry remained resilient throughout the recession, and accounted for more than 10% of all UK manufacturing in 2009. In the forecast period, it is expected that the food and beverage industry in the UK will increase at an annual rate of approximately 6.5%.
In addition to this, the pharmaceutical industry will also be a factor behind growth in the UK packaging industry in the forecast period. The ageing population in the UK, drug advances, growing awareness of health issues and demand for prescription and over the counter (OTC) pharmaceuticals, vitamins and minerals, will all create demand for pharmaceutical products. As a result, this will aid growth in the packaging industry which provides blister packs, tubes, bottles and cartons for these products.
The UK packaging machinery industry is driven by exports
In the review period, the UK packaging machinery industry registered a CAGR of 6.61% and in 2010 its exports were valued at more than US$400 million. This strong growth is expected to continue into the forecast period as a result of increased demand for food and beverages in the Gulf region and other developing nations. As these areas tend to import packaging machinery rather than manufacture it themselves, this provides an opportunity for the UK to export its packaging machinery in the forecast period.
In addition to export demand, domestic demand will also contribute to the packaging machinery industry in the forecast period. Consumers are increasingly demanding sophisticated and environmentally friendly packaging which requires specialised packaging machinery to manufacture. This demand will lead to growth in the packaging machinery industry as it caters to the variety of packaging needs.
Shift towards lightweight, environmentally friendly and efficient packaging
In the review period, the UK packaging industry began to see a shift towards more user friendly packaging options. For example, many plastic packaging companies substituted petroleum based thermoplastics for compostable polymers, which are made from agricultural resources, in order to create lightweight and environmentally friendly plastic packaging products. In addition to this, the packaging industry is also attempting to replace rigid plastic packaging with thinner, lightweight plastic in the hope this will reduce the use of plastic material in the UK by 1,900 tons annually. It is expected that this trend will carry on into the forecast period as consumers continue to demand environmentally friendly packaging which uses less energy to manufacture and reduces levels of waste once used.
Not only is there a trend amongst consumers for packaging which has a limited impact on the environment, but the UK Government also encourages this through a variety of regulations. The Department for Environment, Food and Rural Affairs (DEFRA) has introduced a directive to minimise the impact of packaging on the environment. DEFRA set guidelines for the UK to recycle 55% of all packaging materials and recover 60% per annum. By 2008, these directives had been exceeded, with more than 60% of packaging material recycled and approximately 65% recovered. By 2020, DEFRA hopes that 80% of all packaging material in the UK will be recycled.
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