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Posted: 15 Dec, 2020

On Thursday 10th December, TMA Yorkshire was privileged to have guest speaker, Roberto Simone, a Business Credit Risk Analyst with Xenia, give his assessment of the performance of the economy in 2020 and his outlook for 2021. With nearly 20 years’ experience of analysing credit risk to support decision making, Roberto’s session was well worth listening to and the recording can be found here.

We thank Paul Davies, TMA UK Director and Incoming President for opening the webinar, along with Richard Leach, TMA Yorkshire Board Member, for moderating it. Thanks also to Catherine Sweeten, TMA Yorkshire Board Member, for organising and our guest speaker Roberto.

 

An economic review of 2020

Roberto began with a review of the UK economy which, with a national debt of over £2.2 trillion and rising unemployment, isn’t in very good health. The latest GDP data has confirmed that the UK has suffered the deepest recession on record and the economy is around 10% smaller than it was at the beginning of the pandemic. At the end of 2019, UK unemployment was at an historic low at around 3.9% but in September 2020 figures suggest it had risen to 4.9%. Given the scale of the pandemic, this figure is still remarkably low when compared to our European neighbours and once Government support measures come to an end, forecasters are expecting the figure to peak at a 30 year high of around 8%.

In response to the pandemic, the Bank of England cut interest rates to 0.1% and has printed more money than ever before. Currently, the inflation figure is very low and stable but if the VAT cut is reversed in January, as planned, Roberto worries that this is likely to push inflation up and with the significant quantative easing that we’ve seen this year, this could lead to hyperinflation. If inflation is higher than expected it could put companies off investing, particularly if they’re concerned about future costs and demand.

Commenting on the impact of Brexit, Roberto thinks that whatever the outcome of the ongoing deal negotiations, businesses face a wide range of challenges in the coming months. He worries that many businesses are sleeping walking into Brexit, not ready or equipped for the period of trauma we’re likely to experience.

 

Sector update of the 3 main bellwether industries

Moving on to an update of three of the UK’s key bellwether industries, Roberto said the pandemic has been a massive shock to the construction industry with the value of underlying projects falling by around 60% in Q2 2020. Once strict measures were lifted this was followed by a sharp rebound and although it’s difficult to forecast the industry’s recovery, early indications look positive. And whilst there have been a number of insolvencies in the constructor sector this year, the primary reason for these have not been the pandemic. The sector should, however, not be complacent and companies can’t continue to rely on a few repeat customers and must seek new business.

In the retail industry, Roberto thinks that development activity is likely to remain weak. With many store closures, job losses and potentially the worst Christmas trading numbers on record, the outlook for retail doesn’t look good. However, Roberto think those retailers that are embracing technology, reducing their overheads, offering the right customer experience and selling the right products will bounce back. But encompassing technology will be key.

Looking at manufacturing, the pandemic has resulted in the sector facing some of its toughest challenges for generations. But with challenge comes opportunity and manufacturers have shown themselves to be adaptable with many responding to supply chain issues and altering production lines to start supplying new necessities like hand sanitiser and ventilators. Brexit will bring about new challenges for the industry and those that will thrive are likely to be the ones that embrace digitalisation, trade with new countries and diversify.


Considerations going forward

“Never let a good crisis go to waste”

Thinking about the lasting impact of Covid-19, Roberto thinks there are a number of possible futures depending on how governments respond but that remote working is here to stay. Home working has forced many companies to open their eyes to its benefits and on the evidence to date, it has proven to increase productivity in many cases.

What is also certain, is that there has been a shift to a new global paradigm, creating a profound realignment that only happens once in a generation.

Roberto also believes that this pandemic is a precursor to a technological transmogrification. He thinks that global supply chains will increasingly rely on the use of technology and blockchain technology is likely to become the currency and innovation of choice for cross-border industries and companies. But with many industries built in an analogue era, they will have to work hard to keep up with the digital transformation.

Concluding his talk with some assertions, Roberto said that road to recovery will be rocky but that there is an opportunity to build back better and in a more streamlined way. Whilst Government measures have helped many businesses tread above water, once they are withdrawn the full impact of the pandemic will be felt and there is likely to be a tsunami of insolvencies next year. Ending on a more positive note, Roberto said he is optimistic that the rise of green energy and new technology will create new jobs and help to drive economic recovery.

Thank you to Roberto for taking the time to share his outlook and forecast and thank you to all the participants who joined to listen and ask questions at the end.

This was TMA’s last webinar of the year, rounding off an exciting series of well-attended and well-received events that we hope have proved interesting to our members and guests.

Next year, we’ll be back on 13th January with our Annual Review / Preview event, a highly anticipated event that always books up. Registration details to be released soon.


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