December 21 2014 Latest news:
Ben Woods, Business writer
Wednesday, April 9, 2014
Wolfgang Palm has made King’s Lynn a national centre for paper production. Business writer Ben Woods speaks to the chief executive of Palm Paper about the importance of its west Norfolk site.
The decision to scrap a tax sweetener for businesses constructing new buildings remains a threat to investment, according to Dr Palm.
Wolfgang Palm has urged the government to make a U-turn on its move to scrap capital allowances on buildings if it wants the UK to remain competitive with the rest of Europe and encourage overseas firms to set up shop in the UK.
Capital allowances give tax relief to firms for the fall in value of assets bought for business use by writing off their cost against taxable income. But HMRC phased out the incentives for agricultural and industrial buildings in April 2011. “What no one understands is why there is no longer capital allowances on buildings in the UK,” Dr Palm said. “Nowhere else in Europe is this the case.
“It is certainly a threat to new buildings being built in the UK and it is a threat for people who want to invest in the UK.
“We did not know when we decided to make our investment that this new law would come in during the construction of our site in King’s Lynn.
“I strongly believe the government should think about looking at that.”
Wolfgang Palm never planned to build a paper mill in Norfolk.
The idea came when UK publishing houses approached him personally to find a way to secure the long-term future of their supply.
What was troubling the newspaper and magazine giants was not the quantity of the paper produced, but where it was coming from.
More than 50pc of the newsprint used to publish The Sun, The Telegraph and the Eastern Daily Press was being sourced from Europe, fuelling concerns that a strike at a British port could be enough to bring the printing presses to a halt.
European leaders should be brave enough to overhaul the structure of the European Union which has become mired in bureaucracy, Dr Palm said.
Although he believes future referendums on Scottish independence and EU membership remains a decision for the people, he admitted that a failure to tackle the layers of bureaucracy was a concern.
He said: “There are two points: the referendum on Scottish independence and the referendum on the UK’s position within the EU. It is a decision of the people of the UK on how they want to create their future and I don’t want to give any advice.
“But Europe has a lot of disadvantages and I fully understand that. I am concerned about how the EU is set up. The bureaucracy is incredible and we need a different structure in Brussels.
“I don’t understand why every member nation has a commissioner.
“If it goes any further then we will end up with 40 or 50 commissioners – and how can you run a business in the EU when it is creating more bureaucracy that we don’t need?
“I am unhappy that the countries in the EU have not had the strength so far to call for a new structure of the EU system, especially when budgeting also remains a big issue.
“If we do get a new set up in the EU then the decision for the UK people might be easier. But I understand the concern because a lot of things have to be considered.”
The solution came in 2008 when the diggers broke turf at Poplar Avenue King’s Lynn, marking the beginning of a £400m investment to create a paper mill on the banks of the River Ouse.
Fast-forward six years and Palm Paper has established itself as a leading Norfolk business and a major employer.
Last year the EDP Top100 firm recorded sales of £173m – up 1pc from £171m in 2012– with staff numbers growing from 191 to 202 over the same period.
For Dr Palm – chief executive overseeing six paper mills across Germany – the decision to create a Norfolk site has been a resounding success.
“We have had great relationship with the publishers in the UK,” Dr Palm said. “They asked us to come to England to build this mill and they have supported it by giving us enough orders.
“Before we set up in King’s Lynn, the import rate on newsprint paper was too high. If there had been a worker’s strike at the ports then it could have caused them a problem.
“Since then, we have been able to run the mill at full capacity, which is a great success for us.”
Today, the publishing industry faces a new conundrum. Changes in reading habits has seen some people move away from printed products to absorb their news on tablets or mobile phones.
So what does this mean for Palm Paper – a business driven by a strong customer appetite for printed products?
While he admits he is unsure what the future holds, Dr Palm remains convinced that the market for print will remain strong. “The general developments we have seen in the publishing industry is that newspaper and magazine demand is decreasing,” he said.
“Some countries have rates which are a little bit higher or lower than others. Austria, for example, has had an increase in consumption. This could be down to magazines changing their classification to newspapers when they switch paper quality to save costs.
“The decline is a general trend and no one knows where the bottom is at the moment. Certainly electronics have taken some people away from print, but we work with 100 publishers across Germany and the UK and we do not anticipate there to be many more changes.”
In recent years, Palm Paper has also moved to make its own efficiency savings.
While Dr Palm was not willing to answer questions about its enquiries to source energy from the controversial King’s Lynn incinerator project, he did reveal that the firm had taken over a recycling business in the North West to provide its mills with the steady supply of fibres needed to make newsprint.
It comes after the firm faced fluctuating prices for raw materials in recent years sparked by erratic Chinese buying in the EU market.
“We took over a recycling business near Liverpool so we could secure our fibre supply,” Dr Palm said.
“We brought the plant from waste paper dealers allowing us to have direct access to the source of our paper production.
“If you would have asked me a few years ago, I would have thought that we would never have done it because we do not have the knowledge.
“But now, with everything we have learned in the recycling business, we would like to do something similar with our six operations in Germany.
“It is a major advantage because we have secured our supply and we are reducing cost.”
But the recycling model is not the only area where the Norfolk operation is outperforming its German counterparts.
“The one problem we had when we set up the mill in the UK was the fact that we didn’t have the experienced people,” he said. “So we had to bring in 25 Germans to oversee the work. Now we have decreased this support from Germany and it is run completely by English people from Norfolk. In fact, we noticed that the production of the mill actually went up when the Germans left.”
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Question marks surround the fate of several development projects in and around King’s Lynn after the developers behind the project went into administration.