As we approach the end of 2022, it may be difficult to believe that only 12 months ago, the world was trying to cope with the emergence of a new mutation of Covid emerging from South Africa.
Fortunately, the Omicron variant, while more infectious, proved to be a milder illness and due to the highly successful vaccination programme introduced by the UK Government, businesses began to re-open properly in February and have not looked back since.
Yet, while the economy then began to grow again towards pre-pandemic levels, there have been considerable hangovers that have affected the business world since the pandemic.
The most documented of these has been the way that employment practices have changed with the growth in home and flexible working continuing during the early part of 2022. While this has already changed the way that many organisations have had to manage their employees’ time, there were already some indications that more people have been returning to full-time work in offices towards the end of this year.
Another key trend has been the “great resignation” where record numbers of workers have left the labour force as the pandemic’s impact and isolation from the workplace led to a re-examination of whether they really wanted to continue with their jobs or, more relevantly, to work for their current employer.
As a result, tens of millions of people have quit their jobs in the leading economies resulting in serious skill shortages across all industries, an issue which remains a major problem in the UK, with the UK Government now considering measures to attract those aged over 50 years of age back into the workforce.
Whether that will work remains open to question, although in a more competitive workplace organisations will need to change their human resources strategy to look after their staff and make the most of their talents.
The increased need for greater digital skills has also been a key issue for many businesses given changes in remote working practices that were accelerated during the Covid pandemic.
As a result, studies have shown that the majority of CEOs across the world have continued to prioritise digital investment to give them a competitive advantage and to achieve growth in their marketplace.
Here in Wales, the most exciting potential development in this sphere is the potential creation of a National Technology Institute in 2023. Based in the city of Newport, it will be critical in providing real-life applied learning in digital skills for young people and addressing this issue.
Whilst these trends have been influential in changing the way that businesses work, the main concern of governments around the world in the recent few months has been that of rapidly increasing inflation. This has been driven not only by a surge in food and fuel prices that are a direct result of the war in Ukraine but also by the recent Covid lockdowns in China which has meant that the world’s second largest economy has been underperforming.
This has resulted in a massive ripple effect throughout the globe leading to higher costs that are being passed on to businesses and consumers but with signs that the Chinese economy is finally reopening its borders, this development may finally kickstart the global economy.
More importantly, there are signs that inflation may have already peaked in many countries including the UK although the speed at which it reduces further remains uncertain with considerable implications for the cost-of-living crisis that has been affecting households and businesses.
In addition, the financial market seems to have different views on whether interest rates have reached their highest level at 3.5% or whether they will increase further to around 4.5% to control further potential inflationary pressures?
Given these monetary conditions, it is not surprising that the UK economy is currently in recession with the Bank of England suggesting this will remain the case for the whole of next year and potentially the first half of 2024.
So does that mean we should be less pessimistic about the immediate future for UK and Welsh businesses? I have always been half-full rather than half-empty and I am always positive about the role of our businesses in transforming the economy even at the worst of times.
As we have seen during previous recessions, it will be entrepreneurs and innovators within our business community who will step up to the mark and, despite a shrinking economy, will disrupt markets, create employment and prosperity, and make a real difference in every community across the nation.
It is good to read that recent business surveys are already suggesting that firms are increasingly optimistic about their fortunes. I also know from working with some amazing individuals across the Start-Up Awards and the Fast Growth 50 that there are businesses that are ready to make their mark in a range of sectors over the next twelve months and beyond.
What is needed in 2023 is for our politicians to put their trust in such businesses to make the difference at this most critical time and ensure that the economy not only emerges from the recession but does so more strongly than before.
Blwyddyn Newydd Dda!
