As winter sets in, UK businesses have felt a sharp reminder that the pandemic still has a long way to go. A new variant with some degree of vaccine escape may suggest the shape of things to come for businesses rolling up their sleeves to tackle the year ahead.
Consequently, any business-related predictions for the coming year can’t fail to take the pandemic into account. Omicron and any further variants that follow demonstrate how fluid the pandemic is.
Of course, while the pandemic is a global issue, UK businesses will also continue to face the ongoing disruptions we’ve come to expect as each new stage of the staggered Brexit process comes to fruition.
For example, January 2022 won’t just see in the new year – it will also see in a new raft of customs changes, described by the British International Freight Association as “a lot of bureaucracy”, which – for logistics firm DFDS – can only cause “dismay.”
However, if the past year has taught us the challenges of uncertainty, it’s also reminded us of the ability of UK businesses to persevere despite disruptive conditions.
According to the Bank of England’s summary of business conditions for Q3, some sectors in the world of business and financial services have demonstrated such perseverance through strong growth, including reports of a return to pre-pandemic levels.
These lessons from 2021 should colour any predictions of what 2022 may hold for businesses – there’s plenty of room for more disruption, without a doubt, but we’ve seen time and again that British businesses are more than capable of growing and thriving regardless.
New year, new challenges
In broad terms, one of the biggest challenges facing businesses in 2022 will be a backdrop of economic uncertainty.
The Confederation of British Industry (CBI) has recently underscored this challenge by downgrading its economic forecasts for 2022 from a 6.1 per cent growth down to 5.1 per cent.
This is partially attributable to possible disruptions caused by the Omicron variant of COVID, as mentioned above, which will likely have a detrimental effect on the businesses that suffered most in previous lockdowns.
Looking back to the initial lockdown of 2020, the Office for National Statistics found that accommodation and food service industries shrank by as much as 90 per cent in April and May, and – while restrictions may be less severe a world of vaccines and better information – it’s not unreasonable to suppose that businesses in these more vulnerable sectors might face problems if Omicron becomes the dominant strain.
Whatever the pandemic may hold, it’s not the only challenge faced by businesses next year. 2021 has also been characterised by supply chain issues which – according to accountancy firm BDO – have been a factor in a slowdown of output in British businesses over the past six months.
With supplies currently struggling to meet demand, it’s reasonable to assume that such issues are likely to persist as we greet the new year.
These are broad, fairly universal difficulties largely attached to the health of the British economy – and, according to the Director General of the CBI, the best way to combat these economic issues is to focus on business investment.
As such, reflecting on business investment opportunities is a good way to counterbalance the challenges listed above with some of the more exciting prospects that await businesses in 2022.
An injection of optimism
Keeping business investment at the forefront of our minds presents a far more positive view of 2022, with meaningful business growth coming hand-in-hand with incentivisation measures that reward investment.
A key measure is, of course, the “super-deduction” unveiled as part of the 2021 budget, which allows businesses to claim 130 per cent capital allowances on key investments in machinery and similar expenditures that will promote growth.
Although firms like KPMG have pointed out that fresh interventions might be needed in 2023, there’s no doubt this kind of move will result in a business investment rebound next year – as Goldman Sachs economist Steffan Ball notes, this is one of the most generous investment incentives in the world.
This kind of approach undoubtedly inspires confidence – and, in fact, we’re seeing a great deal of confidence in the majority of entrepreneurs and business owners, who (according to a recent Barclays Eagle Labs survey) are reporting a sense of optimism about their prospects in 2022.
The report found that most businesses in the UK (58 per cent) expect to see increased turnover in 2022, with regions like the Southwest seeing heights of optimism reaching 72 per cent.
Encouraging though this perception of 2022 is, we don’t need to be limited to entrepreneurial sentiment or economic forecasting to get a sense of what the future might hold.
Payments analysis was undertaken by Barclaycard, for example, has found that transactions to SMEs have risen 38 per cent beyond 2019 levels – a practical sign that there’s a strong public appetite for engaging with business.
It’s never been tougher to determine what the future will hold, especially with the many and varied uncertainties described above.
However, the pandemic has been around long enough for us to realise that the strength and resilience of UK businesses aren’t going anywhere.
With big businesses encouraged to invest in themselves via generous tax cuts while SMEs see new heights of payments and engagement, there’s plenty of reasons to believe that this resilience is being met by genuine and ongoing opportunities for growth.