Ageing infrastructure 

Investment in infrastructure is needed to maintain national competitiveness and quality of life. It is estimated that between $57 to $67 trillion in new infrastructure spending is needed globally – almost 5 per cent of gross world product – every year until 2030. Additional amounts are needed to service and maintain ageing infrastructure that requires retrofitting or full replacement. In the UK, the need to tackle inadequate and ageing infrastructure (such as roads, rail and electricity generation infrastructure) through capital investment comes at a time when the UK government is faced with a number of budgetary challenges, including the economic slowdown from the pandemic. A changing climate with higher rainfall and hotter summers, as well as population growth, could further impact existing infrastructure. However, the UK has a large opportunity to replace its ageing infrastructure with greener, cleaner upgrades.

Useful further reading

• Report of the UN Economist Network for the UN 75th Anniversary: Shaping the Trends of Our Time | Multimedia Library - United Nations Department of Economic and Social Affairs

Changes in employment 

Several changes to the way we work including automation, the gig economy and increased job polarisation are set to change the nature of employment for many. Automation will have a large impact on the nature of work and productivity. There will likely be a continued expansion of high-skilled jobs, particularly in science, technology, ICT and professional services; and a reduction in low- to medium-skilled jobs (which are being replaced by technology). Intellectual capital has also risen in value compared to physical labour and financial capital, placing a premium on the creation, acquisition, management, and application of knowledge to gain a competitive advantage. The number of ‘gig’ workers who exchange their services on a short-term and payment by task basis via digital platforms has also been increasing. However, the pandemic has highlighted drawbacks for gig economy workers. As ‘independent contractors’, they do not always benefit from any sick-pay leave, unemployment support or health-insurance. The UK has seen slow rates of productivity growth over the past decade, with output per hour and real wages no higher today than they were prior to the global financial crisis. This could be reduced by leveraging new technologies.

Economic clusters

Economic clusters are geographical concentrations of firms within the same industry or from complementary industries. Research by Harvard Business School indicates that co-located clusters register higher employment growth as well as higher wages, enhance growth opportunities in other industries, and raise entrepreneurial activity. One of the goals behind clusters is to increase the productivity and competitive edge of companies both nationally and globally. According to the World Economic Forum, Europe is home to 3,000 industrial clusters, representing 54 million jobs. As they represent around 20% of Europe’s GHG emissions (excluding transport), clusters can also be at the frontline of the drive to net-zero. This is because the scale of energy demand across industries not only creates opportunities for systemic efficiencies, electrification, demand optimisation, and carbon capture, utilisation and storage (CCUS), but also an internal market for hydrogen. In 2021, in the UK, six projects will receive a share of £8 million in government funding as part of a drive to create the world’s first net zero emissions industrial zone by 2040.

Useful further reading

• https://www.weforum.org/agenda/2020/10/industrial-clusters-can-be-a-key-lever-for-decarbonization-heres-why/#:~:text=Because%20industrial%20clusters%20are%20about,jobs%20in%20Europe%20by%202050.

Neo-nationalism

Nationalist movements globally, including in the United States, the UK, China, India, Japan have triggered a neo-nationalist sentiment in many countries. This rise in nationalism could weaken global organisations, such as the EU, WTO, UN, and NATO. In the UK, EU-exit and the continued movement for Scottish independence have the potential to disrupt the UK economy. In addition, the Covid-19 pandemic created the conditions for greater neo-nationalism in the short term, as countries resorted to unilateral policy agendas to mitigate potential shortages in key supplies. For companies, this trend means that purchasing decisions may gradually shift from quality or price value to involvement in addressing social issues, national sentiments, and trade protectionism. This offers companies opportunities to develop products with local “appeal”, leading to the creation of new domestic goods and services.

Housing patterns

The lack of affordable and quality housing stock is a critical issue facing the UK. Estimates have put the number of new homes needed in England at up to 345,000 per year, accounting for new household formation and a backlog of existing need for suitable housing. More efficient construction processes are needed to mitigate this backlog. For example, modular construction offers the opportunity to rethink how housing is designed and built. A modular design process provides an opportunity to speed up construction, make challenging sites viable, and provide varied and adaptable homes that respond to the needs of local communities.

Useful further reading

• Tackling the under-supply of housing in England - House of Commons Library (parliament.uk)
• Could modular construction spark a UK housing revolution? - Arup

Green economy 

A green economy can be defined as low carbon, resource efficient and socially inclusive. In June 2020, the UK Prime Minister committed the UK to “build back better, build back greener, build back faster”. The plan aims to bolster the economy and turn the UK into the world’s number one centre for green technology and finance, creating the foundations for decades of economic growth. The ten-point plan will mobilise £12 billion of government investment — and potentially three times as much from the private sector — while aiming to create 250,000 jobs in the UK. The plan covers: Offshore wind; Investment in hydrogen; Nuclear power; Electric vehicles; Green transport; Zero-emission planes and ships; Efficient homes; Carbon capture; Restoration of the natural environment; and Green innovation and finance. 

Useful further reading

• UK motor industry celebrates 20 years of sustainable growth | Automotive World
• The construction sector can pave the way for a green economic recovery - World Business Council for Sustainable Development (WBCSD)
• ICTs as Enablers of the Green Economy: A brief on Internet policy issues (iisd.org) 

Post-Covid Economy

Over the short term the magnitude of the recession caused by the pandemic was unprecedented in modern times. UK GDP declined by 9.8% in 2020, the steepest drop since consistent records began in 1948. The recovery will be different across regions, with some estimates suggesting the North East will have the greatest economic under-performance over the period to 2025. The UK government stepped in at an unprecedented scale to support consumers and firms, with a quarter of workers having their wages paid by the government via the furlough scheme (which estimated total costs of over £80bn). At the same time, the government underwrote firms borrowing worth hundreds of billions of pounds to avoid mass unemployment and business closures. The results are likely to impact the UK’s public finances for decades as well affect future patterns of employment.

Useful further reading

• The economy after Covid-19 | Vision | University of Nottingham
• How the COVID-19 crisis is affecting UK small and medium-size enterprises | McKinsey

Regional connectivty 

Links within and between regions are fundamental for facilitating economic growth, allowing businesses to move their goods to market and allowing individuals to access employment opportunities. Connectivity refers to transport, energy and telecommunications infrastructure which lays the basis for economic, political and social interactions. Both Brexit and the Covid-19 pandemic have created some uncertainties and challenges to regional connectivity, which could impact innovation and competition. The UK government’s levelling up agenda contains several measures to support and enhance regional connectivity across the UK. It is still not fully clear the Covid-19 pandemic has had on the importance of physical connections relative to digital links.

Useful further reading

• Levelling Up the United Kingdom - GOV.UK (www.gov.uk)

Remote working 

Post-Covid, it is unlikely that workers will return to the office in the same numbers as before. This has important implications for where economic activity takes place. Connectivity and flexibility in work structures will blur the physical boundaries between workplaces, cities, and homes. Not only will it affect city centres, it also means that many residential neighbourhoods are likely to change permanently. Working from home enables businesses to draw from a larger pool of talent further away from physical offices, including more highly qualified and motivated individuals and more diversity. The possibility to work remotely opens up new opportunities for places outside large cities to reach new markets and attract new residents and firms. In addition, remote working patterns could worsen inequality as educated, high-earning workers are more likely to be able to work remotely compared to people working in jobs such as retail, healthcare, transport and other customer-facing services.

Remote work also raises concerns around the privacy and the security of personal data. As organisations further transition into remote and hybrid work structures, cybercriminals will target organisations with weak legacy security architecture. 

Skills shortages 

The Department for Education’s (DfE) latest Employer Skills Survey (2019) showed that a quarter of all vacancies were skills shortage vacancies (which could not be filled because the employer couldn’t find the skills they need). Nearly three fifths of these shortages were reported in middle and high skilled roles. There are concerns about whether EU-exit and the new UK immigration system will create a further skills shortage in the UK. According to the Open University’s Business Barometer, the skills gap is costing UK companies £6.3bn a year on inflated salaries, temporary staffing, recruitment fees and training.