What we can learn from a peek into the crystal ball

The ripple effects of recent global events are particularly acute for our people and we need to put time and resources into supporting them, offering skills development and new flexible opportunities.

Schemes such as Kickstart in Britain and work opportunity tax credits in the United States are vital to help young people to join the workforce at entry level after the difficult years of lockdowns. Digital innovation is the key to solving the productivity challenge.

Despite this volatile and uncertain environment, the fundamentals of good business do not change and those that prioritise operational flexibility, innovation and culture will continue to succeed.

Jennie Daly, Taylor Wimpey
It is a very different environment from when I took over in April. We have been rigorously preparing for the challenges we are now facing, given the cyclical nature of the housing market. We are well prepared and have put many actions into place, but 2023 is going to be a challenging year for all businesses.

Housebuilders are at the sharp end. Mortgage rates have put pressure on affordability and the recession and cost of living crisis all have an impact on consumer sentiment, especially towards housing.

The planning system has been in the news quite a bit lately. It has become complex and slow and I am sure it will continue to be a significant area for us next year. We should not forget how important homebuilding is in supporting local economies, bringing inward investment and economic growth.

There are positives because with challenge comes opportunity. We have underlying confidence in the long-term fundamentals of the market. The fact that there is an enduring undersupply of housing means there is strong demand. There will be opportunities to differentiate ourselves, more so now than at any time over the past few years.

We have had five housing ministers in 2022, so I would hope to see more stability. It is important that we have a ministerial team with a growing knowledge of the sector. We all need to be able to have a dialogue that is fruitful. We have never been proponents of long-term interventions in the housing market, but first-time buyers are particularly affected by the present challenges.

Brian McNamara, Haleon
Covid has changed the way many people think about their health, making consumers increasingly focused on overall wellbeing. Coupled with growing pressures on public health systems around the world, this means the consumer healthcare sector will have an even more vital role in helping people to take greater control of their own health.

Despite this, given the macroeconomic environment 2023 looks likely to be another challenging year for consumers. They will have tough choices to make about how to manage household budgets and where to spend their money, but although a lot of people might be willing to try a cheaper supermarket version of an everyday household item, when it comes to health typically there is less compromise. People want brands they trust. In this volatile macroeconomic environment, the key to maintaining loyalty is to invest in science and innovation to meet changing consumer needs.

Another consequence of the pandemic was a greater spotlight on health inequity across the world and within countries and communities. More inclusive healthcare is a trend we expect to see. We can do that through driving health education, making products more accessible and helping to break down the social, economic and cultural barriers that keep better everyday health out of reach for too many people.

Lyssa McGowan, Pets at Home
Last year was incredibly unpredictable and I do not think that that is going to change in 2023. The cost of living crisis has started for a large part of the population and will continue.

We are in a very defensive category: 75 per cent of what we sell is non-discretionary and as long as we stay focused on ensuring that pet care is affordable and accessible across the range of budgets and that we focus on finding ways for customers to save money the business will thrive.

In difficult times like these, consumers have that real bond with their pet. An affordable treat of £5 or £10 once a month is a pick-me-up. That is something we have seen come back, even for discretionary items. We continue to see that things will be difficult for the industry, but a focus on price, convenience, affordability, value and availability has stood us in good stead.

The cost inflation picture is mixed. Freight has come down and for a lot of retailers that has been a big headwind that will reverse out. Energy is very uncertain and much inflation is linked to energy prices. We are focused on growing our like-for-like sales by keeping our pricing where it needs to be. We are in a good position compared with many other categories: we have structural growth and premiumisation, as well as more hybrid working leading to more people getting pets.

Sarah Bentley, Thames Water
We can no longer ignore the realities of climate change. The British love to talk about the rain, but it is not as wet as all the mocking from abroad suggests. This summer was one of the hottest and driest on record and Thames Water had to introduce a hosepipe ban.

We are turning things around and fixing a leak every ten minutes. We have set targets to plug holes in our ageing pipes and are investing record sums to upgrade our network. Customers can help by using a smart meter, which cuts bills and helps to identify and fix leaks.

This will not be enough to create an environmentally sustainable water supply for future generations. Each day we deliver about 2.6 billion litres of water to ten million customers across London and the Thames Valley, but by 2075 this will rise to more than 13 million, requiring a further billion litres a day. To tackle the challenges of a growing population and climate change, the industry, government, planning authorities and regulators will think radically and will work in unison.

I am hopeful that we can begin a new national conversation on water. We need to wake up to the importance of this precious resource, just as we have woken up to net zero. Plugging leaks and reducing consumption are important, but creating new sources of water will be a necessity and our plans include a new reservoir in Oxfordshire.

Nikolay Storonsky, Revolut
One of the biggest challenges for the business in the year ahead is the falling level of customer spending. We are seeing consumer confidence drop among certain segments of the population and that is a warning overall. People are cutting their budgets, particularly on entertainment and travel. At the same time, we are seeing a significant rise in spending on utility bills.

In terms of opportunities, for us they come in the form of high interest rates, encouraging customers to put their deposits with us, and we expect these to continue to increase.

Cryptocurrency will continue to be volatile, but when you step back and look at the overall picture the infrastructure will remain important and more and more financial solutions will start using it. In five to ten years, customers will still use bank accounts and credit cards for financial transactions, but you will start to see some transfers through the blockchain. I believe that the infrastructure of crypto is here to stay.

For me workwise, next year will be about focusing on the expansion of Revolut’s business in different countries, each of which have their own slightly different regulation regimes.

Anne Boden, Starling Bank
House prices inevitably will soften, but no one knows by how much. People can no longer read the property market: we all got it very wrong during the pandemic, when everyone expected prices to fall but there was a boom. We have never seen this sort of economic environment, so predicting where prices will go now is very hard.

It is undoubtedly going to be a tricky time for consumers and businesses because of inflation and rising interest rates, but I do not think the outlook for the economy is as bad as some people believe. We are not seeing many small business failures at present, although there will be some. We will do our best to support our customers, as usual, to listen to people’s individual circumstances and will make sure that we do everything we can to restructure debt if that is needed during this cost of living crisis.

If I had to bet on anything in 2023, it would be that we will see more misery in the crypto industry. It is now causing retail customers a lot of heartache so there will be a bigger push to regulate it. We may see further collapses like FTX, the crypto exchange, and there could be a knock-on effect on the wider financial technology world, because I suspect many people think that crypto is fintech. If more crypto exchanges fail, will that mean that people will think less highly of fintechs? As a fintech bank, that could be a problem.

Nigel Wilson, Legal & General
My expectation for 2023 is that Britain will enter a mild recession. The UK did not do enough on investment last year to give us the necessary momentum going into 2023, so it will be a painful economic background, but not a catastrophic one. It will be manageable.

My great hope for 2023 is that the country will start to turn on the tap to the huge amount of investment that could and should go into infrastructure and venture capital. The UK is a low-growth, low-productivity, low-wage economy, fraught with political infighting. The good news, though, is that science and technology have moved so fast that we have been given a second chance. There are fabulous opportunities in areas such as renewable energy, electric vehicles and life sciences.

Proposed changes to Solvency II [the regime governing insurance companies] could pave the way for billions to be channelled into infrastructure investment. We are hoping that the legislation gets passed in 2023. I am also hoping for changes that will allow defined-contribution pension funds to invest more in growth equity. We think there is a real tap that could be opened if Britain changes the rules.

There are huge opportunities in the regions, too. I would score progress on levelling up at no more than two or three out of ten so far. We have had so many false starts, but whenever we go into the regions we see political leaders putting people first and politics second. They are increasingly understanding that they have to become much more independent from Whitehall.

My big concern for 2023 is whether international investors will continue to buy government bonds, which finance public spending. The Bank of England has bought more than £800 billion [through QE] and defined-benefit pension schemes own £500 billion of index-linked gilts, but the Bank is definitely selling its holdings, while defined-benefit schemes are now increasingly in run-off and do not need any more.

So who is going to buy the issuance of maybe £200 billion or £300 billion of new gilts in the coming year? I have asked this question of at least 50 people and I have not yet had a good answer. It could push market interest rates higher than people expect. That is the key challenge for the Debt Management Office in 2023.