Business outlook 2018 – what are the prospects for the year ahead?

As businesses around the country open their doors for the first time in 2018, many stakeholders will be turning their attentions away from Christmas festivities and towards their plans for the year ahead.

2017 proved to be a turbulent year for UK businesses and the economy as a whole. Brexit negotiations grabbed the headlines alongside news of falling economic forecasts and flatlining productivity. On the positive side the economy has yet to suffer the major setback from Brexit that many predicted, unemployment is at an all time low, the FTSE100 ended the year at an all time high (and up 7.6% overall), and Mergers & Acquisitions (M&A) deal numbers and values have held up well.

2018 is likely to prove to be a year of similar uncertainty and mixed prospects for businesses.

Brexit will continue to dominate headlines as the negotiations move into the next phase. Of particular interest to businesses (especially those who trade heavily with the EU) will be talks on potential trade arrangements after the UK exits. The importance of such arrangements cannot be overstated as the outcome, whether positive or negative, will affect the fortunes of UK businesses for decades to come.

How these talks progress will also have an impact on the acquisition and sale of private companies in our region. The M&A market is often negatively impacted by any form of uncertainty. If the talks appear to be going badly or are faltering this could drive transaction numbers down as buyers (from inside and outside the UK) become wary of investing. Contrary to these fears, we continue to see deal activity remain at very high levels. Perhaps, currently, businesses and entrepreneurs are “keeping calm and carrying on”? I see no sign of that abating yet in early 2018.

Attention should also be given to the political landscape. If the Conservative coalition collapses there may be another general election. In such a scenario there is a very real prospect of a labour majority and government. Their policies, which are likely to include reversing cuts to corporation tax, increasing capital gains tax and nationalisation of several key utilities and public services, could have major effects on the profits and operations of many businesses.

Economic growth is predicted to continue at its current anaemic pace. The OBR’s most recent growth forecast figure for 2018 is 1.4%, down from 1.5% in 2017. This will be followed by annual growth of 1.3%in 2019, 1.3% in 2020, and 1.5% in 2021. The effect on business will be to limit potential growth and increase the squeeze on those entities who are currently ‘just getting by’.

Despite all these uncertainties however there is still ample room for UK businesses to thrive. Those who plan carefully, keep control of costs, and look to innovate, will find plenty of opportunities to expand and increase profits. In the absence of any further macroeconomic “shocks”, these core factors will continue to drive the sale and acquisition of companies in our region and the UK as a whole.