2024 has not exactly been a stellar year for UK business. Interest rates remain relatively high, GDP growth has slowed, inflation remains stubbornly above 2% and the new Government is taking aim at profits. However, the dark days of double-digit inflation and stagnating salaries are largely over. Consumers are back spending, average earnings have risen almost 5% and manufacturing output is up. Sprinkle on some tax changes, ongoing technological innovations and mutterings of increased tariffs and we have some planning to do. So, let’s look at planning beyond 2024 and the challenges ahead for business in more detail.
Why you should be planning beyond 2024
Poor planning equals poor performance. We may have omitted two ‘Ps’ from this famous phrase but it has never been truer. Things are changing at pace and businesses are reeling from a 5-year period that has thrown everything at them. Casualties are aplenty, as are under-performing businesses. The SME sector, in particular, has long been a target of the Government’s drive to boost productivity. This is especially true given that they comprise 99% of companies, over 60% of employment and nearly 50% of turnover. Successive attempts at stimulating the sector have failed to reach the majority. For larger enterprises, the problem is magnified as a range of stakeholders apply the pressure. They also have bigger rivals, heavier regulatory burdens, reporting requirements and complexity.
There are many reasons to get on with planning beyond 2024, such as:
- Researching your market opportunities;
- Understanding if and how you will grow;
- Considering how to mitigate risks and threats;
- Documenting targets that you wish to achieve;
- Structuring your organisation to achieve its goals;
- Aligning resources to what you need to achieve;
- Adapting to regulatory, tax and legal changes;
- Agreeing how to measure progress.
Now, let’s look at some of the future macro-trends that may affect your business.
Macroeconomic trends planning beyond 2024
Here, we outline three of the largest influences on business from our perspective. This is neither exhaustive nor a complete view of conditions or events that will affect the economy.
1. Conflict and geopolitical tensions
As various wars rage on, it exposes many types of business to supply and price shocks. If your business consumes a large amount of fuel and/or energy, the risk is greater. Even if you are not directly involved, just being located in a country on the wrong side of an argument can impact you. For example, many countries supporting Ukraine have seen an escalation in cyberattacks. Additionally, you may not directly deal with a country that is currently on HMG’s naughty list. However, as recently uncovered in Azerbaijan, they seem to sell a huge amount more Range Rovers than they used to do…
As Donald Trump prepares to re-enter the White House and the EU has increased import tariffs on Chinese electric vehicles, the stage looks set for further protectionism. Countries that, in recent years, binged on cheap Chinese imports for telecommunications and cloud computing may come to regret the ‘openness’ to their new ally. It could be difficult to open up the US market if your IT infrastructure is wedded to East rather than West.
Finally, nobody knows what each nation will submit in 2025 in their next nationally determined contributions (NDCs). Will leaders shy away from curbing emissions and go for growth or tighten regulations that force green, sustainable practices? The EU’s CBAM scheme is already attracting heaving criticism, especially for its unintended impact on developing nations.
2. Tax, spend and borrow
It has not escaped the attention of business. The new Chancellor’s autumn 2024 budget came with teeth and booby traps. Firstly, the teeth. Employer’s NICs are increasing by 1.2% to 15% at the same time as the threshold has lowered from £9,100 to £5,000. In theory, these extra NI payments will rake in about £25bn per annum. Why not read more about our tips for mitigating the increased employer contributions. The energy profits levy increased, as did the employer’s minimum wage by 6.7%. Substantial monies were committed to health, housing education and infrastructure.
Now for the booby traps. Business investment is expected to fall, employment to fall and inflation to rise because of tax changes. The size of the state will reach 44% of GDP, driving inflation 0.5% higher, increasing borrowing and prices for businesses competing with HMG for services. Total taxes will reach 38% of GDP with CGT, IHT, VAT on school fees and freezing income tax bands reducing consumption. There is also the prospect of IHT on farms adding to food prices in the future. Though fuel taxes were frozen, road pricing keeps on popping up and air passenger duty has again seen an increase. Despite the raft of tax changes, spending will ensure that borrowing remains high. All we need now is the UK’s credit rating of AA/AA- to drop, which will increase the cost of Government borrowing.
3. Technology, technology, technology
Machine learning, adaptive AI, AI acceleration, quantum computing, gigabit networks, 6G mobile and beyond. It is estimated that AI adoption is 2-3x the level it was 6 years ago. Leaps in computing power are just around the corner and, to some extent, are already happening with specific AI accelerators. Some suggest that the AI boom will require 4x the energy to operate by 2030, presenting urgent challenges for energy grids. Communication networks are moving towards widely-available gigabit connections. Samsung and others are working on 6G networks and Chinese influence on technology standards is expanding.
As these leaps in computing power and communication speed and availability appear, it brings opportunities and risks. The opportunities are massive computing power, saving time and resources, reducing the need for local IT infrastructure. It also means more widely available, better and real-time AI companions and support systems. Similarly, AI may be able to make sense of data lakes to provide key insights that today are a challenge to get at. The risks are little things like cybersecurity – being hacked by a sophisticated AI (or network of them) is another level to the stereotype of a kid in their bedroom. Furthermore, with the possibilities on offer from quantum computing in future, cryptography will need to advance. After all, what is the point of a 16-digit password that can be broken in under one second?
Planning beyond is what we do
Here at Think Beyond, we help senior leaders to increase performance and/or find opportunities. With sophisticated research capabilities and business planning approaches, we tease out the permutations of the game. This helps organisations to be prepared for the opportunities and risks thrown at them. If the last five years has taught us anything, it is that instability is now the new normal. Our message to you is to arm yourself for the fight by preparing your organisation for multiple battles.
If you would like support in planning beyond 2024, simply e-mail our courteous team or request a relevant callback online.
Alternatively, why not check out the feedback from some of our customers.
Finally, why not read what happens when planning and risk are overlooked.