2022 Sector Outlook

Technology, trade and sustainability creating hotspots of opportunity

View our 2023 sector outlook for the Eastern region

Mixed fortunes

Stephen Ainsworth, Head of Mid-Corporate, Eastern Region, shares his insights on what 2022 might hold for the region’s SMEs as they capitalise on opportunities to help build a more sustainable future.

While many businesses across the East of England bounced back strongly last year from the worst of the pandemic, it clearly continued to impact some sectors more than others.

Across every sector though, the health crisis has been a real test of existing business models and the adaptability of the region’s SMEs to ride out the Covid storm.

Of course, the big winners have been any businesses involved in the explosion in e-commerce as consumers increasingly turned to buying online – something my colleague Luc Arama looks into in more detail in his blog^. This has not only been good news for direct-to-consumer businesses but produced a welcome knock-on effect for the likes of out-of-town warehousing and haulage businesses, albeit at a time of well-publicised driver shortages.

That shortage, along with post-Brexit trading arrangements, contributed to significant delays at our region’s major ports at Felixstowe and London Gateway, while global supply chain issues and rocketing container prices have had a big impact on import and export costs.

Meanwhile, the staycation boom over the summer brought a welcome boost to hospitality and leisure businesses, particularly in our region’s seaside towns, while some manufacturers continued to benefit from their pivot into Covid-related products like masks and other medical equipment.

Elsewhere, there was further high-profile investment in Cambridge’s world-renowned life sciences hub – with AstraZeneca’s new £1bn research and development campus in the city being just one example. In fact, Cambridge was also recently cited as the “unicorn capital of Europe”, reflecting factors including its high levels of venture capital funding, number of unicorns (start-up firms worth more than $1bn) and capture and retention of talent.

As businesses bounced back, we saw the stronger companies look to take advantage of M&A opportunities and I think this will continue into next year as investors and trade buyers look to acquire or merge with businesses that have adapted well to a changing economy or, conversely, snap up those businesses that have struggled.

Sustainability comes to the fore

Looking ahead to 2022, I see huge business opportunities being created by the growing focus on environmental, social and governance (ESG) issues and national efforts to build a more sustainable economy.

Our region already has some of the leading universities engaged in climate change research and other institutions – such as the National Institute of Agricultural Botany (NIAB) in Cambridge, the John Innes Centre in Norwich and Rothamsted Research in Hertfordshire – focused on plant science and crop research in response to the pressures on food security, nutrition and yield because of the changing climate.

We also have a bourgeoning sustainable energy industry in our region, with further planned wind generation off the coast of East Anglia and with feasibility studies having identified the area around the Bacton Gas Terminal on the Norfolk coast as a potential hub for wind energy distribution and a focal point for hydrogen production.

A decision is expected in 2022 on the new Sizewell C nuclear power station in Suffolk, and there should also be news about the proposed new Bradwell nuclear plant on the Essex coast. All of this could create huge opportunities for local sub-contractors across the energy supply chain.

And there’s reason for further optimism with similar opportunities arising from the government’s inclusion of Freeport East (Felixstowe and Harwich International) and Thames (London Gateway and Tilbury) on the list of the UK’s new freeports, which should provide a real boost for these locations not only as key trade gateways, but also in providing significant tax benefits to attract a range of businesses.

In the technology sector, in addition to the well-established and world-renowned centre of excellence around Cambridge, the London-Harlow-Stansted innovation corridor continues to attract technology companies, as does the Cambridge-Norwich tech corridor, and the Oxford-Cambridge Arc. Further east, Adastral Park is home to BT’s global innovation labs as well as to Innovation Martelsham, a growing information and communication technologies (ICT) hub.

Green challenge

Adopting an effective ESG strategy will be a key challenge for SMEs going forward, particularly those that feed into the supply chains of local authorities and larger companies, who will increasingly impose sustainability criteria on their contractors to meet their own ESG targets.

While plenty of companies tell me they plan to ‘go green’ in 2022, the challenge is to find an effective place to start the transition to net-zero which also balances the business’s other commercial objectives. But this in itself creates opportunities for businesses specialising in advising other companies on how they can be more sustainable and reduce their carbon footprint, and those that offer services in measuring, verifying and certifying a company’s green credentials. By the way, you can get some practical guidance on shaping your company’s green strategy at the biz4Biz Annual Conference^ in March, which Barclays is sponsoring.

While the renewable energy and other green-tech industries should have a great future in our region, I do share the concerns of those who point to the significant investment in national infrastructure which will be required over the coming decades. As we move to greater electrification of homes, cars and industry, the ‘grid’ will need to grow and adapt to transport and deliver the electricity produced from new renewable sources to new areas of demand. Similarly, hydrogen distribution networks will also need to be considered.

This is an ongoing challenge for the region, but probably of more immediate concern to local businesses – just as elsewhere in the UK – is the likelihood of rising inflation, continuing staff shortages, supply chain disruption and, of course, the uncertainty over the new Omicron variant.

The Brexit impact is likely to mean a continuing labour shortage, particularly in the farming sector, hospitality and leisure, construction, haulage and care services. Our hi-tech companies continue to face a challenge to attract and retain the best talent.

Although there are challenges, I’m feeling pretty positive about 2022, given the exciting opportunities being created across the region, particularly as businesses look to grow again, and as the region focuses on technology, research and renewable energy as it continues its transition to net zero.

Our Eastern Region team will continue to do all we can to support local SMEs in 2022 and beyond, including through our Build Back Better webinars^, packed with useful advice and insights. We look forward to working with you.

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