2020 will be a year many businesses will want to forget. But in some respects, the unique challenges thrown at all sectors have created an opportunity to challenge the status quo, experiment in new areas and reset both the business model and aspirations for the future.
Brexit and COVID-19 remain key drivers in 2021
UK economic growth in 2021 is forecast to be anywhere between 1.3% and 7.5%. While forecasting is never watertight, the assumptions used by the Office for Budget Responsibility (OBR), the government's independent economists, in their central forecast last November seem sensible and are based on:
- continued disruption from COVID-19
- an effective vaccine becoming widely available by the end of the year
- the UK making an orderly transition to a typical free-trade agreement (FTA).
By meeting those parameters, they predict the UK economy will grow by 5.5% in 2021, with output returning to 2019 levels by the end of 2022. In addition, unemployment is expected to peak at around 7%, with inflation rising to 1.2%.
Only time will tell how smooth the transition to our new relationship with the EU is and how this recent lockdown impinges on economic activity. But, while the detail might be unclear, the message is crystal - 2021 is forecast to be a lot better than 2020.
Key things to look out for in 2021
When will lockdown end?
The first thing to note is that we are currently in a national lockdown with no fixed end. Although measures are due for review in February, the expectation seems to be that they will last until March.
Will we see a bumper Budget
The upcoming Chancellor's Budget on 3 March has the potential to be a bumper edition. Following a modest Budget last year, this will be the first major fiscal event after Brexit and since the initial onset of the coronavirus situation.
In normal circumstances, we would expect to see tax rises, though it may still be too early in the recovery for that.
Elections of varying significance across the UK
There are also the small matters of some elections with the London Assembly, metro-mayoral and Welsh parliament elections.
The most significant election is likely to be in Scotland. The possibility of another independence referendum is growing, and a strong Scottish National Party (SNP) performance in May has the potential to be the precursor to a renewed push for a second vote.
Outside of the political sphere, there are some other key dates for business:
- The introduction of IR35 in April
- The potential expiry of some temporary EU access decisions (on data, for example)
- The introduction of the VAT 'one-stop shop'
- Full implementation of new border processes
With all of that in the next six months, it looks set to be a busy year ahead.
2020 taught us many lessons on navigating volatility and the need for agility. We'll need to build on them in 2021.
Business outlook
Our International Business report showed...
Source: Headline results from the GT International Business Report (IBR) which took place in Oct-Dec 2020, where 10,000 businesses in 29 economies were interviewed
Our latest International Business Report showed that UK mid-market organisations are braced for further cuts and restructuring as increased coronavirus restrictions put pressure on funding.
72% of UK mid-sized businesses can continue to trade using only existing funds, though 44% of them will have to cut costs and restructure to do so. This represents a slight increase compared to the first half of 2020 (42%).
The events of 2020 have created an uncertain and challenging operating environment that has directly damaged revenue, profits, and cash flows for mid-market businesses. Almost half (49%) of the UK IBR respondents expect to see a decrease in business revenue by the end of 2020, with 29% expecting a significant decrease of more than 10%.
“Businesses need to continue to be agile and adapt, and to redefine value in this dynamic world. The key constant is change, and those businesses that can embrace change in a confident, prioritised, focused way will inevitably be those that emerge the strongest moving forwards.
"In 2020, the ability to adapt quickly and effectively has been absolutely vital to not only navigate the challenges that the last 12 months posed, but also to be able to take advantage of any opportunities that have emerged. For most organisations, the critical role that their people play in their agility and resilience, has also come into sharp focus. 
"There is a bigger picture question linked to value, which is what are we all valuing now?
