ICAEW’s held its second UK Regions Economic Summit with the Bank of England earlier this month, launching ICAEW’s Business Confidence Monitor (BCM) results for Q3 2023 with Huw Pill, Chief Economist at the Bank of England, providing an update and answering questions.

The event offered an opportunity to discuss regional economic issues across London and South East, Scotland, North East, Yorkshire and Humber, Northern Ireland, North West, Wales, Midlands, South West and East of England. In particular, debates centred on risks and opportunities, sources of growth, and initiatives needed to drive growth.

Risks and opportunities

Against a difficult economic backdrop, risks dominated discussions – members highlighted ongoing economic and political uncertainty as critical, while recognising the opportunities that more stability could bring. 

Delegates agreed that growth is contingent on investment and having the funds to invest, with caution a consistent theme given policy uncertainty and a higher cost of capital. “Political uncertainty and a lack of a combined authority means businesses aren’t making decisions for growth,” one member in the construction sector based in the North East said. Construction has been one of the hardest hit sectors identified in the BCM, where consumer confidence and interest rates have a big impact.

Bearing in mind that public expenditure and large infrastructure projects create demand for businesses in the supply chain, the cancellation of a significant proportion of the HS2 project has understandably been cause for concern. One member in the North West commented: “The message that HS2’s cancellation sends is bigger than the impact of its cancellation.”

On interest rates, the sentiment is that “there is a generation of people and businesses that are not used to rates being where they are”. Rising prices, combined with higher interest rates to curb inflation, and the consequent negative impact on consumer discretionary spend, were discussed across all regions, with retail and hospitality sectors especially concerned. 

But among the doom and gloom, technology is seen as one of the UK’s priority growth sectors. The AI summit at Bletchley Park and the Chancellor’s repeated reference to wanting to make the UK the next Silicon Valley demonstrate ambition. However, in practical terms the story may be somewhat different. “There is a mismatch in what businesses need, can access and afford. What lenders and investors are comfortable and willing to accept in terms of risk is low,” cited a member working in the sector.

Availability of skills has been a recurring challenge mentioned by members across all sectors throughout 2023. Although there are signs that pressures are starting to ease, members referencing the opportunities green industries and technology present also bemoan skills shortages in energy efficiency solutions. 

“There are not enough homegrown skills to support our business, especially in electric cars,” a member from the Midlands warned. Meanwhile, feedback from the North West stressed the importance of businesses engaging with education providers to develop skills needed in the workplace.

In Wales, new technologies supporting green infrastructure, decarbonisation and energy production were flagged as huge opportunities. The sentiment was echoed in the North West, where the “opportunity to recruit and retain talent with a lower cost of living and better work-life balance” was mentioned. In the Midlands, a “fantastic heritage and great academic institutions to drive technological advancement and business innovation” were cause for optimism. 

Sources of growth

There are numerous sources of growth, in addition to the transition to net zero and technology. “Rebuilding public services, including roads, rail and housing, will be a big stimulus and create jobs if the UK can afford it,” was noted in the Scottish discussion. Scottish delegates also emphasised the development of a smart energy infrastructure including investment in the National Grid, solar, battery storage and electric vehicles.

Despite challenges reported in trading overseas, members recognised the growth opportunities exporting can bring. North East members in particular highlighted the US as a high growth market for technology. Despite international opportunities, Welsh delegates highlighted onshoring as a means to reduce the fragility of supply chains by using products and components closer to home and working with trusted partners in areas of the world less likely to be disrupted. 

Perhaps unsurprisingly, levelling up in one guise or another came up in all discussions across the UK regions. The Midlands highlighted its central location as a catalyst for investment. The hospitality sector in the North East, meanwhile, cautioned that the “UK needs to work hard to draw spending from overseas tourists north, rather than have it concentrated in the South East”.

A key theme in discussions, especially in the East of England, was the need to improve customer focus. Leveraging data and analytics to gain a deeper understanding of customer needs to provide personalised solutions and use of automation to improve operational efficiency were seen as a key driver of growth.

Initiatives needed to drive growth

For financial services in London and South East, stability, reduced volatility and a less expensive regulatory regime, were all highlighted. “Growth is only going to come where regulatory tools are proportionate,” one delegate remarked. This was echoed in the North East, where a “long-term government commitment, taking politics out of the equation and tax reform to support new build and growth in the housing market” was a key ask. 

Funding for skills in Scotland, and more training of young people in trades, such as plumbers and electricians in the North East, was echoed across other regions. Despite technological advancement, there’s a recognition that people are essential for UK growth. The importance of good interpersonal skills, “as people buy from people” was emphasised in the North West and Wales.

Members recognised the importance of improved consumer confidence and a fall in inflationary pressures as necessary economic conditions to drive growth. Retail results from Black Friday and the future trajectory of the rate of inflation will no doubt be closely watched. 

Despite the multiple challenges businesses remain resilient, and recognise that opportunities in technology, green energy and improving the customer experience are there for the taking. 

What is clear is that ICAEW Chartered Accountants, working in all sectors and across all regions of the UK, will play a pivotal role in driving business growth, both now and in the future.