It’s that time of year, when Business Link Magazine invites the region’s business leaders to offer up their predictions for the year ahead.
It has become something of a tradition, given that we’ve been doing this now for over 30 years.
Here we speak to Dave Atkinson, regional director for the East Midlands at Lloyds Bank Commercial Banking.
2023 was a turbulent year for businesses in the East Midlands, with inflation, skills shortages and the cost-of-living crisis continuing to present challenges. But firms are beginning to see the light at the end of the tunnel. Our latest Business Barometer research recorded a confidence reading of 34% for the region, meaning businesses closed out the year far more positively than they began it, with confidence up 19 points from January 2023. The East Midlands is also one of only two regions to see a month-on-month increase in December.
Here’s what I foresee as the main focuses for East Midlands businesses in 2024 to continue building on this optimism:
Prioritising technology investment
2023 has seen developments in areas such as AI, the metaverse and big data continue apace, and 2024 looks to be no different. It’s clearer than ever that digitalisation is essential to keep up with the market and competitors. In our Business Barometer, almost a quarter (24%) of East Midlands businesses identified introducing new technology as their main target area for growth over the next six months.
The technology opportunity is two-pronged. Investing in and adopting tech in their own operations will enable East Midlands businesses to make their processes more efficient, increase productivity and reduce costs. Likewise, the East Midlands has a well-developed manufacturing and technology sector, and those businesses which can bring new innovations to the market before competitors will see rapid growth driven by customers looking to be early adopters.
Economic uncertainty will continue, but there is a silver lining
After several years of disruption, businesses are well aware of the risk geopolitical tension presents to their supply chains and sales opportunities. Uncertainty is set to persist in 2024, with the ongoing Russia-Ukraine war, the conflict in the Middle East, elections in both the UK and US, and tensions between the US and China. Bringing supply chains back to the UK, or reshoring, will be an opportunity for the region’s businesses to insure themselves against disruption, while also creating more jobs in the region. Simultaneously, the UK itself will be looking to mitigate against future global challenges by securing its own production and energy, bringing opportunities for East Midlands firms in these sectors.
But East Midlands businesses are resilient and have already adapted to changing global headwinds. Through my work with local firms I know that many are beginning to see a buoyant uptick in their supply chain. As a region with a strong automotive manufacturing sector, for example, an end to the pandemic-induced semiconductor shortage has meant that production will rise in 2024, with manufacturers boasting fuller order books and a more positive outlook for the new year.
While the economic outlook is uncertain, there is a major boost coming to the region in the form of the East Midlands investment zone, set to cover parts of Nottinghamshire, Derby and Derbyshire. Expected to help leverage £383m in private investment, it will provide funding and support for innovation and growth projects, improve infrastructure and increase the region’s visibility and attractiveness, due to the generous tax incentives for businesses. 2024 will also see the region’s very first Mayoral elections, as part of the East Midlands devolution deal, which will see it benefit from £1.14bn of funding for transport, education, skills, housing and the environment. The plans are a huge opportunity for businesses, and it will be an exciting time for the region.
Focus on skills shortages
Businesses have been plagued by staffing troubles in 2023, and they aren’t going anywhere in 2024. The East Midlands unemployment rate has sat at 3.7% for the past five months, significantly below the UK average of 4.2%. The incredibly tight labour market means high levels of competition between firms to attract the best talent. And with the Investment Zone set to create 4,200 jobs over the next decade, labour shortage will only grow if businesses don’t prioritise it over the coming year.
The East Midlands is home to multiple world class universities and research institutions, however we lack the skills in factories to actually implement the excellent ideas being generated in the region. This is seeing businesses sell their ideas abroad and buy back the products produced to sell. By creating the practical skills we need here in the region, local firms can ensure their ideas are realised and become profitable.
In our recent Business Barometer, 40% of the region’s businesses said they plan to increase staffing levels over the next year – the highest percentage of any UK region or country. To do this, they will need to focus on tapping into the region’s diverse talent pool, as well as attracting more young people.
Sustainability opportunity
The tide is turning on sustainability requirements, with growing numbers of businesses viewing it as an opportunity for growth. By decarbonising their own operations and processes, businesses can differentiate themselves in the market. The UK’s best and brightest increasingly want to work for firms that are shifting the dial on climate change, giving employers the chance to attract new talent and alleviate the skills shortages which will continue to plague them in 2024. This will be particularly true for businesses hoping to attract young talent, which may have otherwise chosen to leave the region to work for businesses in larger cities such as London, in search of work they believe to be more forward-looking.
For SMEs, reducing their own emissions also makes them a more attractive supplier to large companies, which are increasingly under pressure to report on their own emissions, including scope three – the emissions of their supply chain. If local firms can produce a sustainability statement showing they are decarbonising, or can prove their emissions are lower than other players in the industry, they can position themselves favourably against global competitors. With the East Midlands Investment Zone set to focus on green industries, 2024 will see more East Midlands firms bolstering their sustainability credentials to give them the edge over competitors.
While many of the challenges that were present in 2023 will continue to persist this year, the region’s businesses are well placed to capitalise on the opportunities that present themselves and I believe we’re looking forward to a year of growth in the East Midlands.
