Ready to seize the opportunities of 2023 in the North

Looking back at 2022

Like the rest of the UK, SMEs in the North started 2022 in a positive frame of mind as the end of Covid-19 lockdown restrictions promised the chance of getting back to something like normal trading conditions.

As the year progressed, of course, inflation and rapidly increasing costs, including the cost of borrowing and of staff, all began to have a negative impact on businesses.

Two sectors – hospitality and leisure (H&L) and manufacturing – illustrate this year of two halves very well. With the region being home to many national parks, among other attractions, H&L businesses had a strong summer, thanks to the continuing popularity of staycations, but many have since seen profits eaten away by rising costs. In the manufacturing sector, order books held up but the war in Ukraine and renewed Covid-19 lockdowns in China compounded existing global supply chain issues and raw material costs have shot up. Read our recent report, Chain Reaction, for further insight into the environment for manufacturers and strategies for success.

Rising energy prices

Energy prices have already been a challenge for many businesses in the North, and moving into 2023, this is something all businesses will need to consider closely. The latest Government energy support package will see the Price Cap removed at the end of March for businesses in England, Scotland and Wales, replaced by a new discount mechanism based on wholesale prices. All businesses are likely to see a rise in costs although energy-heavy sectors will see higher discounts available. In the short term, cash and profits could be impacted and some businesses may look to increase prices or reduce costs and energy use to try and maintain margins.

Whilst investment in longer term solutions may hit corporates as an extra cost in the short term, it might also be imperative for businesses to look at how they can future-proof their running costs by developing a more sustainable/renewable approach to their energy consumption. With sustainability high on the agenda for many businesses, it is important that the cost of doing business does not overshadow this important transition. For projects with long-term sustainability at the core, sustainable financing may be a suitable option to support any immediate shortfall in cashflow.  

Good management teams always find a way

These costs, high interest rates and reduced discretionary consumer spending will continue to affect business confidence in 2023, especially decisions around investment. The North was the centre of the first industrial revolution so there’s a history here of entrepreneurial spirit and adapting to change – and that’s what’s happening now. 

The Professional Services sector, with its sizeable presence in places like Newcastle, Sheffield, Leeds and Manchester, performed well last year and should have similar success in 2023. Nevertheless, it faces intertwined workforce challenges around the ‘war for talent’ and remote working arrangements. 

To attract and retain the best staff, offering flexible working is valuable, but businesses will also have to make the office a more attractive place to be in, as this shared environment is a great space for senior employees to pass on their knowledge to the next generation of talent.

Labour and skills shortages are big issues facing manufacturers and to solve these problems many are forging links with schools and colleges to promote their industry to students and working with education partners to give young people skills and qualifications to create career pathways.

Avoiding the financial and reputational damage caused by fraudsters is a very different kind of challenge facing more and more businesses targeted by fraud. We are here to support your business to safeguard against this threat by keeping you up to date on the tactics employed by cyber crooks, including ever more sophisticated CEO impersonation and invoice fraud.

Opportunities and strategies for change

Digitisation is an important strategy for businesses in the region to consider. Our flourishing technology sector is really building a name for itself, particularly in the North West. I expect it to continue to thrive in 2023, partly because the challenges faced across all industries is increasingly encouraging businesses to look to technology and automation for solutions.

Many businesses also see potential opportunity in the region’s three freeports, centred on Teesside, the Humber and Liverpool. Aimed at promoting exports, there are expected to be tax and tariff breaks in these special status zones. It's early days, but I know local manufacturers are keen to tap into plans for the freeports to become significant hubs for the renewable energy industry.

An important part of the freeports initiative is to attract innovation and encourage entrepreneurship – something that Barclays has been doing through our Eagle Labs for many years. Our national network offers co-working spaces, mentors and learning tools to help the UK’s start-up community scale and succeed.

We can support companies looking to boost their export activities through a range of financial solutions and if exporting through the region’s freeports is your ambition, we work with UK Export Finance, the government’s export credit agency.

In the creative sector, adding to the BBC’s established base in Salford, Channel 4’s investment in it’s new national HQ in Leeds continues. As both organisations work with local businesses on content creation, their presence in the North provides opportunities for independent production companies and the myriad of businesses that supply services to them.

Finally, the influence of the environmental, social and governance (ESG) agenda is growing ever more important, and all businesses need to be thinking about their sustainability credentials to meet the expectations of both consumers and other companies putting contracts out to tender. 

I’m cautiously optimistic about 2023 for SMEs in the North. It’s not going to be easy but it's certainly not ‘grim’ up North, as the saying goes, there are plenty of opportunities to be positive about.

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