COMMUNITY UPDATE

Criticaleye's Community Updates are read each week by Members, registered users, and subscribers globally. Click on any of the topics below to see the corresponding newsletter. If you would like to comment further on any of these topics, write to us via info@criticaleye.com.






Last year was a tumultuous one for most leaders. They were shocked by Brexit, rattled by Trump and unnerved by the UK’s political volatility – including Theresa May’s promise to address fat cat attitudes in some corporates. In short, we can expect another year of twists and turns.  
 
We speak to business leaders from a variety sectors, to uncover their key challenges and opportunities for the year ahead. 
 
 
UK Growth Will Slow 
Barry Naisbitt, Chief Economist at Santander, explains that UK growth will slow in the year ahead. 
 
Progress through 2016 was uneven and it would be prudent to expect that again in 2017. The International Monetary Fund (IMF) predicts growth of 2.2 per cent in the US and 1.5 in the Eurozone. Prospects for business growth in advanced economies continue to look steady. 
 
For the UK, the major macroeconomic event in 2016 was the vote to leave the EU, which brought political changes in its wake. To date, the expectations of slower economic growth, resulting from the increased economic uncertainty – both before and after the vote – have not been realised. The economy grew by 0.7 per cent in the second quarter and by an estimated 0.5 per cent in the third quarter.  
 
A key concern for 2017 will be how investors react to this continued economic uncertainty, especially as surveys generally point to a slowdown in investment spending. 
 
An immediate reaction to the referendum was a fall in the value of sterling, which should add to the upward pressures on inflation over the coming year. There have already been high profile food price increases. As a result, commentators anticipate that the UK’s pace of economic growth will be slower than in 2016. 
 
 
The Cost of Brexit
Pam Powell, NED at Premier Foods and AG Barr, discusses the financial impact of Brexit on the food and drink industry, as well as regulation and consolidation within the sector. 
 
Food and drink is a good economic bellwether, particularly regarding Brexit as it’s influenced by exports, imports, currency moves and migrant labour.
 
The industry contributed £26.9 billion to the UK economy last year, which is more than the car and aerospace sectors combined. It’s also a big employer, particularly in retail and agriculture, which rely on immigrant workers. After Brexit, access to labour will become a real issue. 
 
In addition, costs for imported materials are rising due to the weaker pound and some commodity increases. We need to work as efficiently as we can to minimise the cost to the consumer.
 
The sugar tax is another important development in the sector, the details of which are expected in March. It currently targets soft drinks, but further government intervention could follow. Finally, I expect there will be continued consolidation in the food and drink sector in 2017.  
 
 
Demand for Leadership Diversity
Joelle Warren, Founding Director at executive search firm, Warren Partners, reveals which leadership skills and experience UK businesses are looking for. 
 
It’s been a stop and start year. Brexit created some uncertainty, which then settled somewhat but people are on the fence again, waiting to see what happens as a result of Article 50 and Trump. It’s been quite tough in some sectors, such as construction, where some projects are being put on hold.
 
Post-recession, a lot of businesses are looking for growth and in particular people who can deliver transformational change. Thirty per cent of our work is with NEDs; those who can critique growth strategies and M&A are now highly sought after. There’s also increased demand for those with international experience as businesses look to export more; even SMEs are coming alive to those opportunities. 
 
Businesses are also looking for cognitive diversity because when you need to instigate a step change in performance, you’ve got to have diverse thinking. There is definitely more demand for gender equality, even on SME boards. We set ourselves a challenging target of having 33 per cent female candidates on recruitment shortlists but in some industrial sectors that’s very tough. I’m quite concerned that the female talent across the north is not visible enough, in fact I think there is an awful lot of talent that is not being sufficiently developed across the country.
 
We’re also definitely seeing more demand for digital talent, but many of those people don’t want to sit on a board with all its governance and risk, so companies need to think creatively about how they get those voices heard.
 
 
Workforce Automation
Mark Parsons, Chief Customer Officer, DHL Supply Chain, UK & Ireland, shares the steps his business is taking to embrace digital disruption and reflects on the wider impact technology will have on the workforce. 
 
We’re seeing big shifts in the workforce due to legislative change and because of the global ageing workforce. This is impacting how we hire and create an effective, diverse workforce. 
 
In addition, changes in population density are creating challenges for supply chain distribution. Highly populated urban areas require even more products and services delivered within less space. We’re working with customers and authorities to reduce the number of deliveries going in and out of those spaces. 
 
Finally, digital developments are both forcing and inviting change – whether it’s through automation, AI, or as a consequence of the consumer. Logistics is often thought of as a traditional industry but an increasing number of deliveries require sophisticated technology. Harnessing the power of digital will be a top priority throughout 2017 and beyond. 
 
All three of these major disruptors are interlinked and represent a significant change in the way we work, consume and live. As a service business we have to adapt in ways that reflect the needs of both our customers and theirs. 
 
We’re embracing the way digital disruption is shaking up traditional businesses. Technologies like 3D printing, advanced robotics and access to big data insights are redefining what logistics can do and helping to solve bigger business and operational challenges. It’s an exciting time for those open to change.
 
The pace of change across all the sectors we work with is often different and impacted by different technological disruptions, so helping our workforce adapt at the right pace is key.
 
 
A Quicker Pace of Change
Matthew Blagg, CEO at Criticaleye, explains why leaders must develop the skills to handle change and uncertainty.  
 
There will be more uncertainty in the year ahead. Take 2016 – most people didn’t think Brexit or Trump would happen, but those unforeseen events will greatly shift the landscape this year.
 
In the UK, currency inflation is putting up the cost of raw materials and employment. Most businesses will be able to hedge against those costs, but it’s impossible to second guess the wider geopolitical issues. It will not be an easy time; the speed of change is increasing and the pressure is on individual leaders to understand it and meet it head on.
 
This year’s economics are likely to be good but there will be issues under the surface. For example, I think UK unemployment will rise as a result of automation and consolidation. I think we will see more unrest as UK workforces adapt to automation, which is likely to lead to more strikes over the year ahead. That will have its own challenges as many leaders aren’t used to working through union issues.
 
Uncertainty is not great from a leadership perspective but there will be opportunities. Brexit hasn’t created the implosion we expected, and it is possible that Trump will create more fiscally beneficial policies and repeal regulations that hinder economic growth. 
 
 
By Mary-Anne Baldwin, Editor, Corporate 
 
What’s your forecast for the year ahead? If you have an opinion you’d like to share, please email me on maryanne@criticaleye.com 
 
Read more from Barry Naisbitt, Chief Economist at Santander, on his forecast for the year ahead.
 
Don’t miss next week’s Community Update, which offers lessons to a first-time CEO. 
 
https://twitter.com/criticaleyeuk