Newspapers vulnerable to UK competition

CHANGES in work practices cutting the 2,600 strong workforce in the newspaper industry by up to 10 per cent could yield significant cost savings for newspaper owners, a new report has claimed.

The report also says the average cost of employing someone in an Irish national newspaper is £35,000, almost £12,000 more than it costs an employer in a British paper. It also warns that some Irish papers are vulnerable to serious competition from British rivals because of their cost base.

The report was conducted by Coopers & Lybrand for the Commission on the Newspaper Industry. The commission asked Coopers to carry out a review of the newspaper sector's cost competitiveness.

The report also questions whether reducing VAT on Irish newspapers will lead to an increase in sales. Immediately abolishing the 12.5 per cent VAT rate was a key recommendation of the commission, although Government sources say that, under EU rules, it can only be reduced to 5 per cent.

The consultants' review says flexible work practices are not reflected across the industry, and that cost savings could be introduced in tandem with new technology. It says national newspapers believe further job reductions are needed. It calculates that 8-10 per cent of staff could be made redundant, redeployed or retrained.

The ability of redundant personnel to obtain employment outside the industry may thus be difficult and this factor will have a bearing on the value of the redundancy package," it says.

The report warns that although Irish newspapers have a competitive advantage in the home market, they have not been as successful in reducing their cost bases as their British counterparts.

The consultants warn that many players in the industry are vulnerable to the threat posed by the establishment of a low cost producer which would actively compete on cover price and advertising rates.

At present, labour costs account for 37 per cent of the total revenue, for national newspapers and 43 per cent in regional papers. However, regional papers pay a lot less and have much smaller circulations.

In general, in Ireland the level of salaries paid relative to the terms of employment and flexibility of work practices obtained is the primary issue of concern from a cost perspective," the report says.

However, the Coopers report says not all of the change in Britain was effected "Wapping style". In the course of their research, the consultants noted that new technology and manning level changes were introduced in a more gradual and consensual manner "which was more akin to the experience in Ireland".

The report also notes that, in Ireland, it is the newer, smaller national newspaper operations and the regional newspapers which tend to be more flexible.

Achieving cost reductions, either through investment in technology, work practice changes or some other combination, requires investment, the report says. "In this regard, we note that at present, the number of companies within the industry which have the resources to undertake capital investment on a significant scale is very restricted," the consultants' report says.

Many publishers are dependent on generating sufficient cash reserves from their current trading to implement investment opportunities or requirements in the future, it says.

. The Coopers report lays out, in detail, the problems facing the industry, including the fact that several newspapers need to invest in printing presses. The commission's report suggested that a unit should be set up within the Labour Relations Commission to assist companies which want to introduce work changes. It stressed that there should be no "Wapping style" confrontations.