Beyond Brexit – The impact of Generation Z and the fifth industrial revolution on UK business
In light of the latest ICAEW Business Confidence Monitor, Andrew Griggs, Senior Partner, discusses the factors which could be contributing to the reportedly low business confidence.
In February, the Institute of Chartered Accountants in England and Wales (ICAEW) published its quarterly Business Confidence Monitor. The survey of 1,000 accountants working in businesses across the UK shows a pessimistic picture. Business confidence, whilst improving slightly remains firmly in negative territory.
Put bluntly, businesses crave certainty, and certainty is in short supply. Change is the new normal.
The ICAEW’s Business Confidence Monitor also showed a more cautious approach from businesses to long term investment, and economic data shared at recent breakfast briefing points to suppressed – and very modest – wage growth.
The picture is complex and extends beyond the looming Brexit deadline.
Organisations are cautious as we are on the cusp of entering what has been coined the ‘fifth industrial revolution’; a revolution driven by technology, and one which will be faster, more scalable and adopted by more people than perhaps all previous industrial revolutions. Everything will be more readily available and will make our lives simpler and faster.
Businesses of all sizes are driving this revolution, but they too will feel its impact. The rising influence of technology on all aspects of society is influencing our perception of value – it must be cheaper because it can be made faster and in greater numbers using new technology.
However, the ICAEW Business Confidence Monitor also shows input prices rising by some three per cent yet with sale prices remaining static. The cost of business is increasing, and these costs cannot be passed on to the customer. The pressures on profits today make long term investment a bigger challenge.
Evolving career paths
At a recent London-based robotics event, attendees were asked if their job existed when they were at primary school – 67 per cent said “no” [2017 Outsource Magazine]. A study by McKinsey in the summer of 2017 showed that 60 per cent of the workforce could be replaced by technology that exists today. Both are sobering statistics.
Generation Z, sometimes called the ‘IGen’, are now replacing millennials as the youngest members of the workforce. Born in the mid-1990s they have grown up managing their personal brand on Instagram, SnapChat and other social media platforms. Consequently, they relate more easily to an individual brand as opposed to a cog in an organisational machine. Welcome to the world of people who potentially see their primary way of earning a living being from micro-entrepreneurial jobs as opposed to stable full-time employment. Portfolio careers spanning many years are already increasingly the norm.
This leaves businesses in uncharted territory and many will not survive.
Pressures on profits, people and brand loyalty
Customers are looking for greater value in all they do and buy, and brand loyalty wears thin. With technology changing the way we live and do business, and with unemployment at its lowest for many years, organisations are having to think carefully and in many cases re-prioritising their investments. Whilst capital investment may continue to be depressed, businesses are re-deploying their profits. They are nervous of investing in the wrong area. Businesses are showing a higher priority in developing and supporting staff and experimenting, especially in IT systems and processes, to improve tomorrow.
Whilst Brexit may be a contributing factor to a lack of business confidence we mustn’t forget the impact of both the fifth industrial revolution and the demands of a very different workforce.
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