Market Insights 2018 Talent Gateway

MARKET INSIGHTS JANUARY 2018 | Issue 1
Market Insights
January 2018 |
BUSINESS OVERVIEW
Key Challenges for Businesses: 2018
Brexit and government legislation
will continue to have a significant
impact on all businesses. Real
Business Rescue 1 reported on the
top challenges for businesses in
2018 supported by the Workforce
Survey 2017 conducted by the
British Chambers of Commerce 2 .
Post referendum inflation
increases and a weaker pound
A unique challenge to be faced by
businesses in 2018 is dealing with
the consequences of our exit
from the European Union. Since
the 2016 referendum, the fall in
the value of sterling has caused
inflation to rise – the subsequent
increase in import costs
adversely affecting operational
and strategic plans for some
businesses.
Although inflation is expected to
level out, the post-referendum
uncertainty on future trade with
Europe makes it difficult for
businesses to plan ahead with
confidence, and there is a
reluctance to make new capital
investment.
Rise in the National Living Wage
(NLW)
The increase in NLW is predicted
to reach £8.75 per hour by 2020.
From April 2017, workers aged 25
and over (apart from
apprentices) should receive £7.50
per hour - previously £7.20 per
hour, with a predicted increase to
£7.90 in 2018. This has increased
operating costs, and adversely
affected profit levels for many
businesses with 50% reporting
higher costs as a result of NLW.
38% of businesses would raise
prices of products and services
and 25% are expecting to reduce
pay growth to shoulder the
increased costs.
The Institute of Fiscal Studies has
also warned that it could lead to
jobs being replaced with
computerized systems longer
term – particularly as the NLW is
rising faster than average
earnings resulting in more people
being paid at that level.
Workplace pension autoenrolment
The British Chambers of
Commerce Workforce survey
2017 highlights three quarters of
businesses are reporting
increased costs as a result of
pensions auto enrolment.
Furthermore, 23% indicate it
represents a significant cost.
Rising Business Rates
At revaluation, which normally
occurs every 5 years, the
Valuation Office Agency (VOA)
IN THIS ISSUE
Top Ten Issues for SMEs
A survey of 400 CEOs conducted by the
Academy for Chief Executives in
September 2017 revealed that the
recruitment and retention of people was
the single biggest issue facing SMEs in
2018 3 . This was in terms of recruiting
enough people to support growth,
sourcing candidates with relevant skills
and then retaining people and developing
them.
Access to investment and funding to
finance growth was also cited as a key
challenge for 2018 with a long and
bureaucratic process.
Brexit remains a concern but equally
businesses have accepted the position
and are now set on dealing with the
consequences of leaving the EU. Top ten
concerns were ranked as follows:
1. Quality People – recruiting, retaining
and developing;
2. Managing Growth and Change –
access and cost of funding;
3. Government – competence,
regulation and understanding of
business including GDPR;
4. Managing Uncertainty – wide geopolitical
and economic uncertainty;
5. Increasing Costs – regulation,
commodities, wages and land;
6. Technological Change and Disruption
– make the most from the digital
economy;
7. Fostering Innovation– delivering
results in a constantly evolving way;
8. Understanding Millennials – what
drives them, how best to retain and
develop;
9. Banks and Stock Market – trusting in
the reputation of these institutions;
10. Security – physical and cyber.
1. Real Business Rescue, https://www.realbusinessrescue.co.uk/articles/directors-advice/five-key-challenges-facing-businesses-in-2018 , 2 nd
January 2018
2. British Chambers of Commerce Workforce Survey 2017, BCC Research
3. Survey of Chief Executive Members, Academy for Chief Executives,https://chiefexecutive.com/key-issues-facing-uk-smes-2018-surveyacademy-chief-executive-members-september-2017/,
September 2017

MARKET INSIGHTS JANUARY 2018 | Issue 1 | 2
adjusts business rates in
accordance with changes in the
property market. Following the
2017 property revaluation,
businesses are faced with
increased business rates. The
impact has been greatest in
London and the south east,
affecting plans for growth and, in
some instances, resulted in rapid
financial decline.
Not only has this damaged plans
for growth and development, but
in some cases it’s caused a rapid
financial decline. It is expected
this will continue to cause issues
in 2018.
There is potential for this to
impact commercial landlords if
their tenants cannot meet these
additional financial demands,
subsequently affecting other
suppliers and other connected
businesses.
Interest Rate Rise
Whilst interest rates have been
relatively small to date, there is
scope for further increases in
2018, which would impact
borrowing and financing. Coupled
with the other challenges likely to
be experienced in 2018, this could
affect businesses’ plans for
growth.
If interest rate rises increase the
value of sterling, although making
imports more competitive, this
would impact negatively on
companies that export their
products.
Sector
Highlights
Charities
The Lobbying Act,
(formally the
Transparency of
Lobbying, Non-
Party Campaigning
and Trade Union
Administration Act) has
presented a real challenge for
charities. It was originally
designed to stop lobbying
companies exercising undue
influence over politicians by
restricting their spending. Since
its extension to charities, it now
includes any activity by a charity
which could be ‘reasonably
regarded’ as intended to
influence voters in England and
Wales. Organisations that spend
more than £20,000 in the 12
months prior to the general
election must register with the
Electoral Commission.
The Act can only be enforced
seven months before any election
but includes council,
mayoral, European and general
elections, resulting in only a few
months of the year exempt. For
smaller charities in particular, it
has proved to be a significant
barrier to forward planning
campaigns 4 .
Healthcare
Deloitte
highlights global
healthcare
challenges for
2018 5 :
Creating a
positive margin in an uncertain
and changing health economy
continues to be one of the
greatest challenges for
healthcare. This is against
decreased funding and increased
costs to fund demand.
There is a need to move
strategically from volume to
value with a focus on population
health management, prevention
and the overall holistic health of
populations. This requires an
evolution in job roles and
technology will be critical to
analysing population health and
social determinants. Healthcare
providers will need to respond
to health policy and complex
regulations as well as consider
reliability of data, security and
data ownership as part of this.
Investment will be required in new
technologies to reduce costs,
increase access and improve
care. From robots and AI
through to 3D printing and
analytics tools, technology should
make healthcare less expensive
and more efficient if providers are
able to invest and keep up with
the pace.
Engaging the consumers and
improving the patient experience
is a key challenge with consumers
reporting the biggest priority in
healthcare is personalisation of
care. Potential ways to increase
patient experience includes
telehealth, social media and
virtual reality.
Globally there is a severe and
increasing shortage of people for
clinical and leadership roles in
healthcare. This is in part due to
organisations being slow to adapt
to new ways of working and the
need to merge talent with
technology.
4. Challenges facing the sector, Jemma Smith, November 2017, https://www.prospects.ac.uk/jobs-and-work-experience/job-sectors/charity-andvoluntary-work/challenges-facing-the-third-sector
5. 2018 Global Health Care Outlook, Deloitte, 2017

MARKET INSIGHTS JANUARY 2018 | Issue 1
j
Financial Services
Financial Monthly reported the top
five challenges for Financial Services
in 2018 6 . Successful social media
together with evolving customer
engagement was a key challenge.
Social media content and practices
are becoming increasingly discredited at a time when
banks are trying to re-build trust. They need to find a
balance between using social media channels with
caution whilst not losing the opportunity to reach a
large audience instantly. Coupled with this is the
wider approach to customer engagement. Data
mining – analyzing data to provide valuable insights –
can help to better target and acquire new customers.
However, it is so extensive now that the challenge is
working out which insights to take forward within
time and budget constraints.
The Basel “IV” reforms includes a shift in the
approach to risk-weighted assets (RWA) from March
2019. The impact is likely to be significant with banks
needing to raise more capital to comply with the new
regulation.
Quarterly Economic Survey Q4 2017
The British Chambers of Commerce Quarterly
Economic Survey is based on over 7,000 responses
from businesses across the UK and is the largest
private sector business survey 7 . Overall growth
together with confidence is low, with businesses not
enjoying the same level of growth that was seen
before the EU referendum. Manufacturers have
showed strong performance, but this reduced slightly
at the end of 2017.
Challenger banks are ‘small retail banks set up to
compete for business with large long established
national banks’. They have enjoyed good growth
positioning themselves as ‘not a traditional bank’. It
is perceived however that the “honeymoon period” is
ending although they still represent a competitor to
traditional banks.
The Second Payment Services Directive (PSD2) was
introduced in 2015 with members of the EU having
until 2018 to implement it. It aims to make payments
easier and information more accessible taking away
the bank’s hold on user data (and the need for
services like Visa and PayPal to make a payment
online). This will signify a real shift in how payments
are made with banks losing revenue from lost
transactions. As part of the PSD2, payment initiation
service providers (PISPs) enable merchants to make
the payment request for you directly. This has been
identified as a possible opportunity for those banks
that can capture this market and reclaim lost
revenue.
Quarterly Economic Survey Q4 2017
Professional and managerial staff were the most
difficult category of employee to recruit. There was
significant variance in recruitment difficulties across
different regions.
In 2018, it is expected that labour and skills shortages
will be the biggest barrier to growth. There is a need
for businesses to invest in people and training – acting
on this shortage. Currently the survey shows
investment intentions remain below historical levels
both for manufacturers and service firms. Nationally,
government need to build an environment that enables
businesses to thrive and kick start growth, giving firms
the confidence to invest.
Half of service firms stated they had attempted to
recruit employees, with 71% facing recruitment
difficulties, the highest proportion since records
began.
Figure 1 Percentage of firms experiencing recruitment
difficulties in each region 7
6. The Top 5 Challenges Facing Financial Services in 2018, Financial Monthly, https://www.finance-monthly.com/2017/11/the-top-5-
challenges-facing-financial-services-in-2018/, November 2017
7. Quarterly Economic Survey Q4 2017, British Chambers of Commerce, 10 th January 2018

MARKET INSIGHTS JANUARY 2018 | Issue 1 | 4
Quarterly Economic Survey Q4
2017: Key Highlights 8
22% of manufacturers
reported an increase in
their workforce up
from 20% on Q3
14% of services firms
reported an increase in
their workforce
unchanged from Q3
23% of manufacturers
expect to grow their
workforce over the
next three months,
down from 29% in Q3
19% of service firms
expect to grow their
workforce over the
next three months
down from 21% in Q3
19% of manufacturers
increased investment
in training in Q4, down
from 20% in Q3
15% of service firms
increased investment
in training in Q4, up
from 14% in Q3
44% of manufacturers
are confident turnover
will increase in the next
12 months, down from
51% in Q3
36% of service firms
are confident turnover
will increase in the next
12 months, down from
40% in Q3
50% of manufacturers
expect their prices to
increase, up from 35%
in Q3
36% of service firms
expect their prices to
increase, up from 28%
in Q3
Hospitality and Leisure
The leisure
industry has seen
a year on year fall
on leisure
spending across
almost every
leisure category. This is a result of
pressures on consumers from
rising inflation and lower wage
growth. 18-34-year-olds are
spending less than last year across
most leisure categories including
the gym, short breaks and culture
and entertainment 9 .
The hospitality and leisure sector
is one of the sectors noted to be
most affected by the increasing
NLW with a greater proportion of
lower paid employees.
Manufacturing
Manufacturing
has been
particularly
impacted by the
continued
uncertainty in the
economy – largely in part to
stalled EU Brexit negotiations 10 .
Poor productivity is an increasing
problem with manufacturing
output falling in 2017 despite
increased hours.
Automation provides a potential
area to increase productivity with
85% of UK manufacturers
implementing some form of
automation in the past 12 months.
This can only be achieved through
finding investment and the people
with the right skills to manage any
automation. “Industry 4.0” is a
drive towards digital supply
chains, smart manufacturing and
digital products together with
data analytics as a key
competency. Automation also
exacerbates the skills shortage in
the sector. In addition, young
people are not entering the labour
market with the right skills and
competencies and the uncertainty
over post-Brexit immigration
controls compounds the problem
– a significant problem in the
manufacturing industry.
Consumer spending is falling, and
the industry has seen a continued
lack of demand for products which
provides further unknowns for
manufacturing.
Media and Entertainment
Key concerns for
the media and
entertainment
sector center
around changing
consumer
behaviours, availability of key skills
and volatile energy costs 10 . CEOs
are more optimistic about growth
compared with last year, with
opportunities in streaming, videoon-demand
services,
improvements in content
discovery and mobile video.
A key area of concern for the
industry is changing consumer
behaviour with technology.
Companies are focusing on digital
and technological capabilities and
innovation to adapt to the
changing market and attract
consumers.
There is a critical skills gap in the
sector with leadership and
creativity as the hardest skills to
source. 40% of CEOs in the sector
expect the number of employees
to reduce with the introduction of
new technologies over the next
five years. The industry is
expected to lose more jobs to
technology than most others and
needs to recruit the right people
to fulfil the roles that can’t be
performed by machines.
8. Quarterly Economic Survey Q4 2017, British Chambers of Commerce, 10 th January 2018
9. Passion for Leisure: A view of the UK leisure consumer – Q3 2017, Deloitte, https://www2.deloitte.com/uk/en/pages/consumer-industrialproducts/articles/passion-for-leisure.html
10. 20 th CEO Survey, PWC, https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2017/uk/key-findings.html

MARKET INSIGHTS JANUARY 2018 | Issue 1
Pharmaceutical and Life
Sciences
CEOs in the
pharmaceutical
and life sciences
sector are
confident of
growth with US,
China and Germany cited as the
most important countries for
short term growth 11 . The UK falls
in fifth place – a significant
increase on previous years.
Innovation is seen as a key area to
focus on to facilitate growth with a
need to deliver greater value for
less cost.
Over-regulation remains an
important concern for the sector
together with pricing pressures
and uncertainty in US markets. An
emerging concern is the speed of
technological change together
with availability of key skills and
cyber threats.
Leadership skills were deemed of
top importance to CEOs followed
by problem solving, creativity and
innovation. These skills are cited
as being the most difficult and
Pharma CEOs are more likely to
move their talent around to
overcome this.
Retail and Consumer
The retail and
consumer industry
remain positive
about their growth
both organically
and through cost
reductions together with new
alliances, mergers and
acquisitions 11 . This is felt more for
consumer rather than retail
businesses.
The sector is less impacted by
automation and technology and
have a focus on innovation in
driving business forward.
Technology is seen as having less
of an impact when compared to
other industries over the next five
years.
For retailers, the wider business
issues of the weak pound, cost
inflation and business rate
increases together with NLW have
created challenges.
Technology
The availability of
key skills and risk
of a cyber attack
are the top two
greatest threats
perceived by UK
Technology
CEOs 11 . 97% of UK CEOs stated
their business was addressing
cyber breaches affecting business
information or critical systems. It
is accepted that cyber security
must be invested in to avoid such
breaches.
UK technology businesses are
focused on building their digital
and technological capabilities to
make the most of new
opportunities, viewing digital skills
as a critical element of this.
Despite this, businesses are
struggling to source candidates
with the appropriate skills. The UK
is behind in terms of exploring
artificial intelligence and the
impact on future skills required.
UK technology businesses see an
increasing competitive
environment as a result of new
technology with it significantly
reshaping the competition.
Transport and Logistics
Globally CEOs
confidence in the
transport and
logistics sector
continues to
decline due to
over regulation
and geopolitical uncertainty 11 .
Digital and technological
capabilities is regarded as more
important than innovation or
human capital in order to exploit
new opportunities. Whilst
technology has had less of an
impact in the five years prior
relative to other industries, it is
viewed as significantly impacting
the sector moving forward.
Over half of CEOs in the sector
plan to hire more employees with
problem solving, adaptability,
leadership, creativity and
innovation being of greatest
importance. Digital skills are also
important and viewed as difficult
to recruit.
Overall CEOs in the UK are more positive about their own businesses’
growth compared to 12 months ago. UK businesses are expecting to
recruit and develop people faster to take advantage of opportunities
when compared with CEOs globally.
CEOs are focusing on ‘tackling cyber threats, monitoring UK
negotiations to leave the EU and addressing skills shortages’.
Overall, the PwC 20 th annual CEO survey – ‘based on a global research
sample of over 1,300 global leaders that included 126 UK CEOs –
suggest that UK CEOs are staying calm and determined as they
continue to pursue growth in an uncertain world 11 .
11. 20 th CEO Survey, PWC, https://www.pwc.com/gx/en/ceo-agenda/ceosurvey/2017/uk/key-findings.html

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