Reasons to be optimistic
Let’s start with the good news. Big picture, those boffins at the IMF recently forecast that 2018 will be the strongest year for global growth since 2011. Good news indeed. In fact, their latest assessment of the World Economic Outlook predicts growth this year and next of 3.9%. No doubt this was helped by the Chinese economy that grew at an annual pace of 6.8% in the first quarter for the same period last year – and beat forecasts of ‘around 6.5%’.
The European Union is also on the up, bolstered by data that suggests the 28 nations collectively grew at their fastest pace in a decade. As for the ‘why’, a tranche of economists and soothsayers can quickly be found to highlight the importance of domestic factors such as rising wages, low inflation, and record-level employment that are driving consumer spending. Reasons that were mirrored in the US, where the biggest gain in consumer spending in three years saw growth revised up to 2.9% in Q4.
Keeping the home fires burning
So to look abroad is to see a picture of economic results consistently outdoing analyst predictions, but what of the island nirvana that is Great Britain? Returning to the IMF, they’ve offered a modest upgrade for growth this year of 1.6% (and 1.5% for 2019) – though with the caveat that the current momentum was ‘not assured’. To this can be added the latest inflation figures, which shows that the Consumer Prices Index was 2.3% in March 2018, down from2.5% in February 2017.
To me, this demonstrates the importance of London/South East to our national economy. As a global hub of international commerce, and home to the headquarters of many global corporations, the region is far from dependent on domestic supply and demand. Speak to a client recruiting for a global CFO role, and you quickly understand that UK economic data is a minor concern versus the ‘bigger picture’ of international trade – which is a narrative born out through many assignments I’ve placed in Q1.
The shadow of a doubt
Amid all this positive ying however can be found evidence of a counter-balancing yang. Figures released last month showed that the economy grew by just 1% in the first three months of the year – which in turn caused the Bank of England to slash its growth forecast to 1.4% (down from 1.8%). All of which points to the challenges ahead, as highlighted by recent high profile news coming from the high street and beyond:
- Byron Burger, Prezzo, and Jamie’s Italian have all entered Company Voluntary Agreements (CVAs) – following Maplin and Toys R Us’ journey into administration
- Add in brands such as Carpetright and New Look, and it’s estimated that nearly 650 shops and restaurants that have shut since the start of 2018 – or are at risk of closure
- UK car registrations plunged March (which shrunk 15.7% year-on-year), with new car sales falling for the first time in six years in 2017 – to about 2.5 million vehicles.
At Eton Bridge Partners, I would suggest the firms experiences to date in 2018 mirror the wider economy. Our Q1 was outstanding, with clients and candidates alike coming fast out of the blocks. Yet performance has dipped slightly in throughout April, due I would suggest to uncertainty in the market (I’ll get to Brexit later) and inflationary pressures. There remain our lead sectors for opportunities – particularly the tech sector that remains a trailblazer in the UK – and pharma/healthcare. Yet equally there have been those experiencing a noticeable slowdown, including the energy sector and oil and gas companies that remain relatively quiet.
What does this mean? Well judging by the conversations I’m having day-to-day, such economic data points to the wider transformational forces at work in the market – and how organisations are responding to this change. Those businesses able to adapt, to embrace technology as the platform for a more responsive and nimble operation, are outperforming the bigger beasts struggling with their legacy investments and legacy mindsets. In retail for example, while many struggle a company like Amazon can flourish because of its ability to embrace change – and to constantly re-imagine the industry it operates within.
Talking up a storm
All of which brings me to my last point, the story that sits between good and bad, the proverbial elephant in the room: Brexit. To watch the news is to be convinced that on-going negotiations to leave the EU have the nation’s business leaders gripped in a state of perpetual anxiety. That it’s the one topic sitting atop every agenda and forward-looking discussion. Maybe it is, but if such a reality exists it goes against the evidence I have at hand – based on the many conversations I’m having with clients and candidates alike.
No, to me Brexit hangs over business like a cloud storm on the distant horizon. We know it’s coming, but companies also know that the world will not end when it arrives – and that it’s business as usual until then. In other words, people are not holding back. Instead they’re making decisions, making investments, keeping calm and carrying on. Certainly for most CFOs I talk to, Brexit is having surprisingly little impact on daily operations. Rarely in fact is the topic of even raised – which is in stark contract to the almost maniacal fixation the media has with the subject.
So in conclusion, I would suggest that the market continues to alternate its status between being a bull and a bear. Certain industries are struggling due to a number of diverse factors, and uncertainty is impacting companies (particularly those trading heavily with the EU). But for others poor performance can often be the result of over supply or a lack of innovation hampering their modernisation agendas. Get this right, and keep the focus where it needs to be – on the customer experience, service levels, and product quality etc. – and the future still looks promising (as demonstrated so emphatically by Tesco’s recent turnaround).
For a recruiter, such an environment should sustain a resilient job market, and lead to an active and rewarding summer period. Yes the UK’s figures are behind the rest of the EU and beyond, but considering the horror stories we were hearing after Brexit, it still seems that we have a lot to look forward to.
Long may that continue.