24 February 2021: Economies across the world are at a crossroads. ICAEW President David Matthews outlines the scale of the challenges we now face and comments on the investment that will support recovery and change.

Even before COVID-19, there were huge challenges ahead with the potential to impact the “social contract” between governments and citizens, business and their workers and consumers. Globally, these challenges include climate change, rising inequalities, disruptive technology changing business models. For the UK, you can add evolving post-Brexit Britain to the list.

COVID has added to the list by increasing national debt burdens at a time when the need for private and public sector investment is already considerable.

Change is needed and it will test economies’ and businesses’ financial and non-financial resilience and preparedness. And we will be tested in an environment that does not look like it did a year ago – potentially increased home, digital and remote working – and we might even see the reversal of trends we thought were here for good, like offshoring and long-distance supply chains.

And there are still more challenges on the horizon. Following the negotiations with the EU, there will be increasing pressure on financial services –a key driver for the UK economy. Science – research, clinical, pharma and logistics – will have to perform in the faster, demand-led fashion to achieve the amazing outcomes we now know are possible. The UK has always excelled as a location for scientific research and now the eyes of the world are truly upon it following the UK’s rapid vaccine development in an uncertain world in which deadly viruses can spread and mutate quickly.

All these challenges exist in a shifting landscape. In the UK, our international trading relationships – including that with the EU – are new. The UN Sustainable Development Goals (SDGs) can and should be a priority despite the general flux, and we will have to think differently if social and economic disparities are to be addressed.

It is going to take huge investment – including significant infrastructure investment – to achieve the necessary transformation which will place further pressure on public finances. Change will come at a huge cost and chartered accountants will have a key role to play in bringing rigour and scrutiny to that spending.

Successfully managing the challenges will also be about getting the right balance. How do we do what's right for the planet, and therefore ultimately future generations, while doing what is needed to build resilient economies now? And who should pay for all the changes, including the infrastructure to support the transition to a zero-carbon economy and help marginalised communities to flourish? 

Societal shifts, new working models, fast digital networks, and so much more have to be paid for but, in the rush to roll out change, getting the right balance will also help attract investors.

It is indisputable that investors have become much more enlightened about the impact of the investments they make, and evidence is now readily available that corporate performance and sustainable practices are much more aligned than ever before.

So how do we get the right investments financed to effect the change required and create the infrastructure of the future that will reposition economies?

Government policy is at the heart of striking this balance, not only within national borders but in the international context too. No one country, in its haste to lead, can create the right environment to manage the crossroads at which we now find ourselves. By the same token, no country will want to create an environment in which it is so expensive to operate that companies establish themselves elsewhere to conserve cash.

The UK is in a unique position, through its chairmanship of COP26, to host the players intrinsic to achieving common international goals through the framework of the SDGs. We must move forward together and not allow those reluctant to change to benefit from a short-term unfair competitive advantage in their own interest. 

We have a huge opportunity to address these issues through joined-up policy and international consensus. Government-sponsored infrastructure projects, if done properly, and with a long-term view in a stable environment, will provide many of the solutions to the myriad of challenges we now face.

There is a dramatic need, now, for infrastructure investment across all economies to achieve the best environmental, social and economic outcomes.