A year in review – and a look to 2022
2021 has been a tumultuous year. The COVID pandemic continues to dominate many aspects of our lives – at the time of writing there is much uncertainty surrounding the Omicron variant – and Brexit is reshaping the way we do business with our European neighbours. Both continue to create very real obstacles for us all.
Yet it has been a year with much to cheer. We have been able to embrace the company of family and friends, and the economy remains strong. Businesses and individuals are largely confident for 2022.
The resilience shown by family, friends and colleagues is something we all cherish and should celebrate.
Looking ahead and standing out with purpose
Yet change continues to remain our new normal and we must all be prepared to embrace and adapt. Whilst change brings challenges, it also drives opportunity and innovation which in turn translates into confidence.
In November, Kreston Reeves surveyed business leaders on a wide range of issues and challenges, published in the report Shaping your future, which suggests that SMEs, the engines of our economy, are ambitious and optimistic for growth going into the next 12 months.
Yet what we want from businesses is changing. Customers, clients, investors and the people who work for businesses are increasingly asking why? Why do we do business in this way? Why does this business exist? What are we passionate about, and what can we do better?
I believe one of the defining questions businesses will have to answer in 2022 is ‘what is our purpose’?
Purpose is not a marketing slogan or strapline. It is the authentic reason that drives an organisation beyond the pursuit of profit. Purpose reflects the true essence of a business, defined by its culture and the values that it holds true. Purpose provides a focus in times of change and uncertainty, a focus on goals, enabling a business to continue to grow and thrive. Given the various challenges in the world today, having this anchor is welcoming.
Purpose, what you stand for, will in 2022 define the recruitment and retention of people, the flow of investment, and the interactions with clients and suppliers.
That calls for strong leadership. Purpose must be led from the top, embraced by management, and shared across the organisation. It calls for investment in people and technology.
People are the ambassadors for an organisation every single day of the year – and need to be underpinned by increased, meaningful and engaged communication. Are you communicating and engaging with them enough? Similarly, technology helps drive leaner products and processes to enable you all to work together towards a purpose.
That is likely to mean that businesses will in the coming year have to carefully consider the balance of their investment between technology and people.
What will we need to consider in 2022?
I see four big themes we will all need to address in 2022 – increased costs, continuing constraints on supply chains, the future of how we work, and sustainability.
Inflation, absent for many years once again hovers over us. Whilst driven by a temporary spike in fuel and energy prices, it is likely to drive wage increases leaving businesses and charities with higher costs they may not easily shake.
Businesses may be given no choice but to increase costs and pass those on to consumers. Increases in wages are unlikely to make individuals feel any better off.
Constrained supply chains have caused businesses major headaches and will continue to do so for much of the next year. Over half of the businesses we surveyed in our Shaping your future campaign report delays of up to six months, and over 60% told us profitability will be hit by at least 10%.
We are already seeing the impact of this on supermarket shelves, in the high street, and in the purchase of cars or electronic equipment. Our survey suggests that manufacturing businesses are looking to reduce output, leaving demand unfulfilled. This will have a significant impact on cash flow and businesses need to forecast potential pinch points and take early action.
Businesses appear to be turning to domestic markets where they see easier growth. At a time when we are looking to reset our position on the world stage, our political leaders need to look long and hard at what they can do to make international trade a little easier.
The third issue will be the future of work. Businesses were quick to implement flexible working and have since grappled with whether employees need to work at home, in an office, or a combination of the two. Almost 50% of businesses in our Shaping your future report say they have permanently adopted hybrid working, and 45% of businesses surveyed tell us it has had a positive impact.
What is clear is that employees want flexibility. They want to choose where and when they work, balancing the respective advantages of working from home with the camaraderie and practical learning and development in the office. People that are not given this choice are likely to vote with their feet and choose employers that offer those working patterns. For those who are unable to offer flexible working due to the nature of their business, they should look to offer other incentives.
Businesses and the people they employ will need to work together to find common ground.
Organisations will also have to revisit the way people are remunerated and incentivised to attract and retain people. For many, a paycheck is not enough. They want to know their employer shares the same passions and purpose, and increasingly have a voice in the way the business operates.
The fourth factor will be the continuing and rapidly accelerating decarbonising of our economy. It will for many businesses and individuals be a costly exercise. It is a cost we all must bear as fires, heatwaves, floods and damaging storms continue to wreak havoc at home and around the world.
Whilst much of this will be driven by policymakers and will, naturally, focus on organisations with the biggest impact on the planet, we all have a role to play. Businesses that continue to exploit resources, pollute the environment or have disregard for the environmental toll they take will face greater scrutiny and action from employees, investors and customers. As individuals, we will need to look closely at many of the choices we make.
Will the 20s roar?
Economists have estimated that approximately £190bn has been saved by UK households following the COVID restrictions of 2020 and 2021, and we are itching to spend.
Many of us will be dreaming again of foreign travel, upgrading the family car, treating ourselves or developing our properties. If we can make progress again away from restrictions, the uncertainty of the past two years may well be countered by a spending spree that will lift our spirits and the economy.
Where and how family finances will be spent will of course depend on our own personal situation and preferences, and availability, which may still be in limited supply.
Kreston Reeves at 200
It has also been an important year for our own firm, marking its 200th anniversary. It is our people and clients that make the firm what it is today, and they were both central to those celebrations.
The firm made significant headway in reaching four of the UN sustainability goals. These are ‘Good health and wellbeing’, ‘Quality education’, ‘Reduced inequalities’ and ‘Climate action’.
In practice, this has seen the firm plant a tree for every single one of our clients, doubling our volunteering hours, raising over £15,000 for community charities, and focusing on diversity and inclusion. More can be found in our CSR Impact report.
I’m sure that 2022 will continue to bring change and challenges but it will also bring opportunities and innovation. Businesses, individuals and charities must continue to look and plan ahead to identify what they can do now to help shape their future. However, for now, as we approach the festive season, let’s use this time to relax and reflect on how far we have all come over the last year, on our achievements.
We all wish you a restful and enjoyable Christmas and a prosperous new year.
Photo by David Mepsted in our audit and assurance team, runner up of our internal festive photo competition. Caption: “A crystal clear image of my family enjoying the snow on my local farmland near Maidstone”.
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