Welcome to our third article in the Cost Of Living Christmas 2023 series. In this article we will be looking at which industries will be spending Christmas day with presents under the tree and which will feel like 2023 was a lump of coal.
As we have discussed in the previous articles in this series, the UK economy is currently an extremely challenging one to operate in. The recovery from COVID has been a slow one and has been marked by a succession of new macroeconomic challenges and setbacks. In truth, our economy was poorly placed to deal with the fallout of COVID after more than a decade of extremely low growth. We have seen record numbers of insolvencies in the last two years and this trend is predicted to continue through 2024, with a higher number of business failures expected next year.
However, this does not mean that it is all doom and gloom for UK business and some sectors, outside retail and hospitality, have managed to succeed whilst others have suffered.
Without further ado, we will look at those sectors that have had an especially bad or good 2023.
Construction – The construction industry is the sector that has suffered the most in 2023. It has experienced more business failures, 18% of all UK insolvencies up to Q3 2023, than any other sector in 2023 and it is estimated that £1 billion of bad debt will be carried into 2024 by the construction industry. Unfortunately, many in the construction industry will face an anxious Christmas and will not be expecting a happy 2024.
Notable insolvencies of 2023 include the Jehu Group and the Buckingham Group.
Manufacturing – Another industry that has had little to smile about this year is the manufacturing industry. As a high energy use sector, the lack luster governmental support for business energy bills since the introduction of the Energy Bills Discount Scheme has hamstrung the industry with skyrocketing operating costs at a time many companies within it were especially vulnerable. Ongoing supply issues, reduced demand from consumers and spikes in demand for many resources have further weakened the sector and added to manufacturing making up 8% of UK insolvencies up to Q3. Food manufacturing companies have experienced a disproportional level of business distress within the sector, largely due to increasing costs and a sharp decrease in demand for processed food and meat free alternatives.
The recent Autumn Statement did extend a lifeline to the manufacturing industry, with billions of government investment earmarked, so many in the industry will be reflecting on a difficult year but have hope for an improved 2024.
Electricity, Gas, Steam and Air Conditioning Supply in the UK – With years of inflated energy prices it is no surprise that this industry will largely be having a very merry Christmas. UK energy companies have enjoyed record profits this year; British Gas reported profits for the first half of 2023 of £969 million which was a nearly 900% rise year on year.
Unsurprisingly, such profits have caused outrage amongst some, who see it as profiteering at a time where the public is suffering from the biggest drop in living standards in recent memory. There has been calls for a windfall tax on such companies in both the papers and parliament but so far no significant movement has been made on this. With a general election looming next year, the industry will be keen for this to not become a battleground issue.
Tourism and Travel industry – 2023 has marked a return to form for the travel industry. After struggling through the years of lockdowns and closed borders, many consumers are valuing experiences over material items and there is a strong market for travel. This has managed to endure even with the cost of living crisis and both airlines and the domestic tourism industry are showing strong results,
British Airways announced in May they expected their annual results to exceed the predicted 2.3 billion euros it had initially forecasted. The strong performance of the sector can be seen in the better than expected pretax profit of £143 million recently reported by WH Smith. WH Smith attributed this largely down to their travel division, which operates in travel locations such as airports and train stations.
The coming year is expected to be another strong one for travel and tourism.
AI – Whilst not a complete sector in its own right, yet, AI exploded onto the scene in 2023. The introduction of ChatGPT introduced the wider world to the coming age of AI that heralds a bright new future for mankind, at least according to its proponents. Some worry about its ability to make a huge number of jobs, and even humans themselves, obsolete. Whatever the future holds, AI is shaping up to be the investment to make in 2024 and governments and investment funds are clamoring to make it.
That brings us to the end of this entry in the Cost Of Living Christmas 2023. Whilst there have been more losers than winners this year sadly, there were still a good number of companies that did well, even in badly performing sectors, who represent ideal business partners.
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