It’s that time of year, when Business Link Magazine invites the region’s business leaders to offer up their predictions for the year ahead.
It has become something of a tradition, given that we’ve been doing this now for over 30 years.
Here we speak to Andrew Mair, partner and head of BDO LLP in the East Midlands.
There’s little doubt that the last 12 months have continued to test the resilience of the East Midlands business community. Impacted by the emergence of a global pandemic in 2020 and its lingering presence, regional businesses have also had to contend with the fall-out from Brexit – adapting the way they operate to manage pressures on domestic and international supply chains, input price inflation, worker shortages and additional red tape and regulation.
The challenges have remained consistent throughout 2021, but the way businesses have dealt with those issues has evolved. East Midlands businesses have remained optimistic about the rate of recovery, have committed to delivering on growth strategies and have stayed focused on critical business issues that transcend COVID-19, such as ESG.
The recent emergence of a new variant has reminded us all that the pandemic is an ever-present threat to businesses and the way in which they operate. According to our latest Rethinking the Economy survey of 500 medium-sized businesses, leaders in the East Midlands fear supply chain disruption will affect their ability to offer the usual range of products and services, impacting end of year trading. Nearly half of companies in the region are planning to increase the prices of their goods and services as a result.
Despite these pressures, more than a quarter (27%) of companies in the region expect to see their revenues return to pre-pandemic levels within three to six months. That sense of optimism translates into plans for 2022, with nearly a quarter (23%) of East Midlands companies surveyed prioritising investment in international expansion, with one in five Midlands businesses looking to drive growth into the US next year.
M&A opportunities have continued to rank highly in terms of investment priorities in 2021, and we expect this trend to continue into next year. It’s fair to say that the regional marketplace has rebounded from a turbulent 2020, with the uplift in activity leading to eager and cash-rich investors willing to pay over the odds for businesses, skewing valuations.
Reassuringly, the fundamental market dynamics remain steadfast, with the appetite of corporate acquirers, private equity, alternative investors and open debt markets showing no signs of abating. The key is finding a good home for the ‘wall of money’ that’s currently available in the regional market.
Sectors to watch in 2022 are technology, which will remain at the forefront of activity, biotech, pharmaceuticals, life sciences and telecoms. The good news for the East Midlands is the re-emergence of ‘forgotten’ sectors, such as automotive and aerospace, as well as hospitality and leisure, which have all suffered at the hands of the pandemic.
One thing is certain in 2022 and that’s the ongoing debate about the threat of climate change, the environment, the depletion of natural resources and the role that businesses have to play in helping to achieve the stated aims of our own and other nations. As a region that has a rich heritage in manufacturing and exports across the world, the East Midlands has a real part to play in the ESG movement – whether that’s by prioritising the green agenda or focusing on achieving net-zero emissions. The efforts to combat climate change will create real changes to business models, operational costs and regulation – and corporate strategies will have to evolve to manage the shifting landscape.
There’s much to digest from 2021 and much to consider for 2022, no more so than the growing emergence of modern, collaborative working, and the transition for many to an agile-workforce. For now, businesses will have to balance the pressures of supply chain disruptions, geopolitical risks, the continuing fall out from Brexit, price inflation, and labour shortages – factors that have and will continue to influence day-to-day operations.
