SEC Newgate's Outlook for 2023

Insights from across the team.

It would have taken a brave person to predict that 2022 would match the previous couple of years in terms of seismic events.  However, as we know, 2022 was marked by the passing of the longest reigning British monarch, Queen Elizabeth II and the shortest tenure of a UK Prime Minister by Liz Truss of just 44 days. 

Whilst we might not have predicted these two events, our colleagues Fraser Raleigh and Ian Silvera get a special mention for their comments this time last year. 

Raleigh, a former Conservative Special Adviser said: “The PM to attempt (again) to control his political destiny, but Omicron, inflation and his backbenchers will have more control than ever. Starmer’s new look team will try to look like a government in waiting – if they can build a poll lead on merit not unforced Conservative errors. 

Silvera certainly called inflation, perhaps not crypto when he said: “Inflation will become the major theme of 2022. Central banks and governments will have to tread carefully, with savers and investors changing their perspectives if interest rates go up considerably. This could trigger a considerable pull-back on the capital markets, but insurgent industries – like crypto – could springboard off such a macro-economic environment.” 

Our experts have looked ahead to what we might expect from 2023. 

Westminster Politics 

Fraser Raleigh, a former Conservative Special Adviser gives us his predictions on Westminster politics for 2023: “The Conservatives’ New Year’s resolution must be to adopt Barrack Obama’s famous foreign policy mantra: “don’t do stupid s**t”. After a year of doing the opposite, the party must show more self-control to have any chance of turning its fortunes around. 

Rishi Sunak will try to follow the calming effect of the Autumn Statement with solid progress ticking off tricky issues that stumped his predecessors. A plan for cross-Channel migration was first, a deal with the EU to resolve the Northern Ireland Protocol could be next, while tackling inflation and the recession looms over everything. He will also need to re-introduce himself properly to the electorate as Prime Minister and give them a reason to trust the Conservatives again, with Labour soaring ahead in the polls and suddenly finding themselves surrounded by businesses and pressure groups who believe they are now the only game in town.  

“With up to two years before the general election nothing is quite won yet, but 2023 could be a make-or-break year for both parties.” 

Dafydd Rees, a former senior journalist says: “The World changed in 2022. It’s going to take some time to process a series of profound and unfolding political and economic changes already taking place around us. Making smart and sensible business decisions has never been harder. Ask Elon Musk or Sam Bankman-Fried. 

“In 2023 we will discover how long it takes for Britain’s hard-won reputation for political stability and sound economic management recovers from the dizzying, dismaying departures of Boris Johnson and Liz Truss from Downing Street. Potential foreign investors in the UK want and need further reassurance.  

“The pundits have been careful to hedge their bets about the prospects for the UK and the global economy in 2023, in spite of the shock that international equity markets have suffered their worst 12 months in living memory. It’s difficult to assess the depth and duration of any looming economic downturn as the data, particularly with reference to employment levels and labour shortages, leaves the experts puzzled.  

“What is certain is that the era of easy money is at an end. Rising yields and inflation at levels not seen in forty years will be having an impact on household budgets throughout 2023. The cost-of-living agenda and falling living standards will be both a political and a business priority, making fairness an issue which can no longer be overlooked.   

“For me, it’s these factors combined with President Putin’s aggression in Ukraine which fundamentally alters our understanding of the fierce urgency of Climate Change finance. A secure and resilient clean energy future is set to define the course of 2023 and beyond.   

Joe Cooper says; “Expect industrial action to continue to dominate the domestic agenda into 2023 as disputes rage on and the effects of the cost-of-living crisis and incoming recession fully take hold.  

“While the Government remains in loggerheads with the RMT over rail strikes, this represents a battle that neither side will want to lose. If the Government blinks first, it will be worried that this sets a precedent and empower other unions to take action, while the RMT will be conscious of the further erosion of union power that another high-profile defeat would represent. With nurses, posties, civil servants, university staff and teachers set for further strikes into 2023, expect widespread disruption to become the new norm.  

“Companies in these industries should increasingly be conscious of the heightened risk of industrial action, and give more attention to conditions and pay for their workforce in the new year.” 

Corporate behaviour and leadership 

Alistair Kellie says, “As the cost of living crisis starts to bite over the coming months, we can expect even greater scrutiny of corporate behaviour as public patience wears thin. For instance, our Great Disconnect report highlights how there is a material disconnect between what the UK public wants to see from companies on ESG and what companies are delivering.  However, there is a lack of trust around companies’ intention, so as ever, authenticity must lie at the heart of every action.”  

With leadership roles and their requirements and responsibilities changing so much in the last few years, Naomi Kerbel predicts what could be on the cards in the year ahead; “2023 is going to be all about being seen. LinkedIn Live, metaverse meet ups and even (don’t groan) TikTok, need to be part of next year’s strategy.  

“Senior leaders will need to consider their personal brand more than ever. To engage, influence and garner support CEOs will need to be active, direct, and intentional in sharing their corporate mission, vision, and values. 

“But there is a difference between reading out lines from an annual report by rote and delivering with conviction why something really matters to you and why the team should get behind it. Passion and commitment witnessed first-hand – albeit virtual - will have a deeper resonance with employees, investors, and customers.  

“When it comes to what’s going on in the wider world, senior leaders are now expected to speak out on political and social issues. But that doesn’t mean you have to respond to everything. Even though none of us has a crystal ball (or at least not one that’s consistently accurate) leaders need to be proactive and engage with their own experts (investor relations, communications, finance teams, customers) to consider what might be coming and what will need an active response for their business. Start by thinking about what’s coming down the track in terms of equality and wider geopolitics.  

“Oh and on TikTok, you need a company strategy. That doesn’t mean your take on the latest dance that has gone viral.” 

Leyla Hart-Svensson considers how companies will engage with key stakeholders over the coming months of uncertainty saying: “As organisations brace themselves for another year of global and domestic uncertainty, they will need to make concerted efforts to engage their stakeholders, customers, and employees. Here, research will play a crucial role in helping organisations understand and respond to the rapidly shifting needs, attitudes, and behaviours of their target audiences, and how to communicate with them most effectively. 

“Accelerating the technological shifts driven by Covid-19, the market research industry will amp up its efforts to enable greater responsiveness, with platforms that offer greater speed and automation, powered by AI capabilities. Gone are the days of the survey that takes weeks to complete, as a raft of new versatile products seek to increase efficiency across each stage of the research lifecycle. Also boosting efficiency is the growing availability of tech-savvy research respondents. As of late 2022, 5.07 billion people are using the internet, with the prediction that two-thirds of the world’s population should be online by the end of 2023. However, with the growing availability of people’s views, comes greater responsibility for research to be truly representative and inclusive. To recognise the diversity of identities and communities, researchers will need to be increasingly mindful about their recruitment methods and the nature of their questions.” 

ESG / Green & Good 

Andrew Adie says, “Every year that passes without a breakthrough agreement on phasing out fossil fuels and delivering net zero sees the urgency of delivering that becoming ever greater. COP28 in November in the UAE will be the next big moment to achieve that much needed breakthrough if we are to avoid catastrophic climate change. Yet, as politicians dither the onus on corporates to act becomes more acute. 

“Our research consistently shows that the public expect businesses to be good corporate citizens. Yet in reality many are scaling back their ambitions in the face of the economic turmoil and cost of living crisis. That is a mistake because the public, politicians and activists are watching and they expect leadership and change and for business to place purpose alongside profit as a corporate goal. 

“Activist groups like Clean Creatives and Make My Money Matter have become increasingly bold in their approach, that trend will continue into 2023. Corporates will be under huge scrutiny to prove they are delivering on their social and environmental purpose ‘missions’ and the public will expect them to step-up to the plate. Those companies that weaken their resolve and stick to the minimum ESG reporting requirements without embracing the opportunity of re-setting their business to drive positive change in the world will face scrutiny, criticism and reputational damage. And COP28 will be expected to deliver far more tangible progress that COP27 and the activists will be back.” 

Dafydd Rees says: “Our understanding of the term ESG and how it applies to investors, consumers and corporates is also changing, and changing quickly. The SEC Newgate ESG Monitor research project indicates that there’s a “Great Disconnect” in our understanding, application and communication of the term which will be an ongoing debate in 2023. It will also provide a critical momentum to the build-up to the COP28 conference taking place in Abu Dhabi later this year.”    

Alistair Kellie adds, “Over the next 12 months or so we can expect more firms to appoint senior managers and board directors with direct responsibility for net zero implementation. - these might take the form of Chief Impact Officers or Chief Sustainability Officers.” 

Financial Services 

Looking at regulation, Alistair Kellie says, “The FCA’s Consumer Duty will lead to a major shift in financial services by fundamentally improving how investment firms serve their customers.  The Duty, which will be onerous for firms to meet, will set higher and clearer standards of consumer protection.  By April 2023, firms must complete all the reviews necessary across four areas: ‘consumer understanding’, ‘price and value’, product and services’ and ‘consumer support’.  This particular piece of regulatory change will likely set the tone, with greater scrutiny over data and general value for money of products and services likely to follow. Other regulators around the world are beginning to follow suit and take a similar focus.  Watch this space.” 

Emily Church says; “Investment managers everywhere will no doubt be glad to see the back of 2022, but the bumpy ride is far from over. Early signs thankfully show that inflation is starting to wane a little but the ramifications of higher prices will last throughout 2023 and into 2024 through its impact on consumer spending – ordinary people will have less disposable income which means less cash to put into savings accounts, investments and pensions. Once you add a UK recession to the mix it is clear that if savers are to financially navigate 2023 effectively they will need more, not less, guidance from the industry.” 

With regard to the world of insurance, Vanessa Chance says; “This coming year is bound to bring even more change for the insurance sector. The personal lines market is likely to see more innovation from non-traditional players as tech creates new routes to market for carriers. This year we finally saw Amazon enter the home insurance market, although in a smaller way than was predicted. There are rumours of Apple partnering with life insurers in the US using their health data to provide the edge on underwriting. Meanwhile, embedded insurance is predicted to grow in the motor market and potentially in other product areas, such as mobile phones. At the same time, the cost of living crisis is creating an opportunity for pay as you go and short-term insurance models, which are expected to become more popular in the market.” 

She also gives her predictions for the consumer finance sector; “The increase in interest rates, combined with the market chaos following Truss’s mini-budget, had a huge impact on mortgage rates in 2022. Experts expect that mortgage rates may slowly fall in 2023 but that we are unlikely to see a return to 2021 prices for some time. Meanwhile, savings rates are finally looking more attractive with the likes of First Direct offering 7% on its regular saver. Experts say that we may see more banks increasing their interest rates for savers, which is good news for those who have spare cash. It does mean that anyone with significant holdings in case may reach their personal savings allowance sooner and anyone in a higher tax bracket may want to consider a cash ISA to help mitigate this.” 

Property 

Alex Reid gives his insight on what could be in store for the residential property sector saying; “Demand for affordable housing tenures, including homes for older people, is going to remain very strong. Expect to see more partnerships delivery, which is far more resilient to economic downturns than the open market, as private housebuilders enter into more JVs with housing providers and local authorities.  

“BTR has been on the scene for a while, but it boomed in 2022 –   Knight Frank recently reported that £3.2bn of capital has been committed to the UK’s BTR sector during the first three quarters of 2022. As the market stabilises, look out for major growth in single-family housing, particularly in suburbs and cities in the North of England.  

In London, the domestic market is going to continue to cool, as mortgage-dependent buyers retreat from purchases, and supply usurps demand. The prime market, however, will remain robust, as these buyers are far less affected by economic and political uncertainty (though supply will likely contract as vendors hold out for the right price).” 

Looking at the commercial property sector, Laurence Hill says; “As a sector often treated as a hedge against inflation, the rapid rate of price increases in 2022 presented a fundamental challenge to the commercial property industry. The rise in interest rates to combat inflation and resultant increase in the cost of debt has led to some of the lowest quarterly investment figures into the sector on record. However, it’s not all doom and gloom as demand for the best-quality, sustainable offices remains strong. While inflated construction costs are a severe obstacle, the demand is there for those that can build! As the economic climate improves in the second half of 2023 and beyond, we expect opportunistic investors with deep pockets investors to come back into the market, and this emergence from recession will provide a much-needed boost for consumer-facing property businesses such as retail, leisure and hospitality.” 

Planning and (Public) Consultation 

With ESG high on the agenda amongst the public, Phil Briscoe gives his predictions for planning and consultations for 2023; “Community consultation in the planning process will increasingly fall under more scrutiny from an ESG perspective amid higher public expectations around companies treating their communities, stakeholders and employees with respect and honesty. As government policies on housing and onshore wind are fudged to positions of not having fixed targets, not really having bans, but increasingly relying on community support to back a project, it will be the developers who take this on board and work constructively with communities that can expect to achieve more in 2023.” 

Amidst the cost of living crisis and climbing mortgage rates, Perry Miller predicts what’s in store regarding new housing; “The rise in mortgage rates will act as a brake on demand for new homes in 2023, to which housebuilders will respond by slowing their build out rates and even mothballing some sites entirely. Add to that, under-resourced local authority planning departments and an end to housing targets, and the stage is set for significant under-delivery on new homes.  

“Further measures in the Levelling Up & Regeneration Bill, including a relaxation of the five-year housing land supply rule, an end to the duty to cooperate and removal of the need to review the Green Belt for housing will see local plan making grind to a halt.     

“The current impasse between developers and Michael Gove, the Levelling Up Secretary, on how life-critical fire-safety issues on buildings will be remediated and paid for, will finally be resolved as they come under renewed pressure from leaseholders. It is not clear who will blink first.”  

Technology, Media and Telecoms 

Ian Silvera hedges his bets that the media will be on the frontline of the oncoming recession saying: “The British media has been quietly recalibrating itself over the last year. The Telegraph had already led the way on combining the staff of its Sunday and weekday editions, and now The Daily Mail and Mail on Sunday as well as The Times and Sunday Times will be doing the dame. The Mail’s go-private move, with the Daily Mail and General Trust de-listing from the London Stock Exchange, has seen owner-operator Lord Rothermere takeover as CEO. Elsewhere, another man from the upper chamber in the Houses of Parliament – Lord Ashcroft – has made his own major media move by buying Politics Home, The House Magazine and other titles from Merit Group, which will now concentrate on its data and intelligence business. Consolidation is likely to be the key word for the industry as advertising revenues shrink in the face of another recession. There are positives to shout about, however. ITV would have benefited thanks to its coverage of the FIFA World Cup, while publisher Future, the owner of TechRadar, Country Life and PC Gamer, continues to make record profits. YouTube, Spotify and other tech-media platforms also provide another opportunity for revenue and brand awareness generation. Subscriptions have helped the media industry cement visible recurring revenues, but amid a cost-of-living crisis even this business model will face significant pressure.  Layoffs, à la CNN, could ensue.” 

Matt Redley says: “Natural language processing, which enables machines to understand natural language like humans do by artificial intelligence, is likely to continue developing, with a greater number of business use cases. Chatbots, modelling or replicating the success of Chat GPT-3, are likely to be integrated into a greater number of online B2C platforms, performing a greater range of tasks, taking the technology mainstream. I tasked Chat GPT-3 to give its tecnology predictions for 2023, it gave the following response: 

Chat GPT-3 says: “It's difficult to make specific predictions about the future of technology, as it can be affected by a wide range of factors and is constantly evolving. However, some trends that might continue or emerge in 2023 include: 

1. Continued growth and development of artificial intelligence (AI) and machine learning technologies. 

1. Further advancement of virtual and augmented reality technologies, which may be used in a variety of fields such as entertainment, education, and healthcare. 

1. Increased adoption of cloud computing and the use of cloud-based services. 

1. The use of big data analytics to gain insights and make data-driven decisions. 

1. Continued expansion of the Internet of Things (IoT), with more devices becoming connected to the internet. 

1. Development of new technologies related to renewable energy and sustainability. 

1. Continued growth of the e-commerce industry, with more businesses shifting to online sales and delivery. 

1. Advancements in biotechnology, such as the use of gene editing and personalized medicine. 

“It's also possible that new technologies and trends will emerge that are currently unforeseen.” 

Note: Chat GPT-3’s knowledge base ends in 2021. 

Energy and Infrastructure  

Is the UK Hydrogen ready? Sara Price gives her thoughts and predictions; “Strengthening long term energy security will continue to be a central theme for both the government and the opposition. With energy bills set to rise further once the Energy Price Guarantee (EPG) ends in its current format in April 2023, expect to see greater emphasis on the clean energy / net zero transition. 

“As part of the future energy mix, BEIS’s consultation on improving boiler standards (closing in March 2023) will set a direction of travel for the introduction of ‘hydrogen-ready’ boilers from 2026. The gas distribution networks, boiler manufacturers, and installers have been keen for clear signals from the government on the use of hydrogen for domestic heating. A positive outcome from the consultation will give confidence to investors and the sector to gear up supply chains, taking the UK one step closer to a hydrogen economy.” 

Consumer Industries 

Clotilde Gros says: “Inflation will continue to be the biggest theme in 2023. The last financial crisis was about downturn in company trading and people losing their jobs, but this time it is widespread across every consumer who is really feeling that squeeze in their pockets. The majority of UK consumers will bear the brunt of higher energy bills and interest rates. As a result, we expect shoppers to become more discerning, selective, and perhaps even reliant on discounts as they look to stretch their budgets. A brief respite will come in April following the start of a transitional business rates relief scheme, a freeze on multipliers and increased support packages which will help retailers protect jobs, keep shops open, and protect local communities.“ 

Paul McCaffrey delves into his predictions for the consumer industries in 2023, and the importance of social consciousness; “Social consciousness will grow ever more important in 2023 as consumers become increasingly aware of social and ecological issues. How brands act, what they say and how they source will help shape brand perceptions and ultimately, consumer spending power. 

“We will continue to advise clients on how they can continue to meet these consumer needs by devising strategies that not only meet the demands of their businesses but also those of consumers.”  

Our resident food and drink expert, Joanna Kent gives her predictions for the next year in the sector; “With the cost-of-living crisis expected to continue well into 2023, savvy sustenance is one of the key trends predicted by Mintel to shape food and drink innovation over the next year. As purse strings tighten even further, consumers will increasingly be looking for food and drink products that combine affordability and nutrition. Therefore, companies that can effectively tap into this with products that offer nourishment and satiety benefits to make us feel fuller for longer, will likely be on track for great success in 2023 “ 

Social and Digital Trends  

Our Head of Digital, Tom Flynn gives his 2023 predictions for the digital world. On Twitter, he says; “Under Elon Musk’s leadership, Twitter moves at lightning speed so my prediction is probably out of date already: In 2023, Twitter will either collapse as a credible platform or Musk will be forced to relinquish control by US and/or EU regulators. Based on his recent behaviour (at the time of writing, he has just suspended a number of journalists) I no longer believe Twitter can be both successful and Musk-controlled.” 

With regard to the Metaverse, “2022 was the ‘year of the metaverse’ that wasn’t. I expect that by the end of 2023, we will not see much progress towards a future where will live part of our lives in the virtual world. It’s just not good enough yet and I think we’re a few years away at least.” 

Looking to the world of AI, Tom’s predicts that “2023 will be the year where AI hits the mainstream. Following the successful beta-launch of ChatGPT, innovative digital teams will be utilising text and image-based AI to assist with creative development and analysis of campaign results.” 

David Linnett expects that: “Video content will be increasingly important to deliver impact and engage with audiences - live videos and interactive videos in particular are going to see a big increase in usage. We will see more client using tools like LinkedIn Live and TikTok to engage with potential customers. 

“Twitter will have a number of challengers but they won't be directly comparable as users are more savvy to what they do and don't like. The community-based platform Mastadon allows users to choose which part of the platform who's policies they prefer (which may also be to its detriment).” 

Wishing you a happy, healthy and prosperous 2023 from all of us at SEC Newgate.