As a result, there will doubtless be industry upheavals, and complex social, economic, and political forces at play. Coupled with the impact of anti-globalisation as a result of Brexit and the current US Presidency, 2018 is not expected to be a ‘quiet’ year by anyone’s standards.
Here, the authors share some key thoughts on what economic issues financial directors may find themselves having to deal with over the next 5 years, and the resulting issues that may affect business strategy.
UK growth is expected to plummet to zero and below in 2018. Brexit concerns will see more companies leave the UK, while those that stay will rein in spending and engage in deep discounting.
Households will cut their spending amid concerns over personal debt and job prospects as public sector redundancies rise, more jobs are lost to automation, and firms cut headcounts to reduce costs.
Other major nations may also see growth stalling, but few will hit the buffers like the UK. After a chaotic few years of Brexit mayhem, growth should start to stabilise by 2022 and crawl above 1% in 2023.
The continued strength of the US economy, a favourable stock market response to President Trump’s tax plans, and chaotic uncertainty around Brexit will all serve to drive down the value of the pound to parity with the US dollar during 2018.
Following erratic movements, which take the pound below $1 during the Brexit wilderness years of 2019-2021, the UK economy will eventually reach a level of calm by 2022 as the shape of the new semi-Brexit position of the UK is clarified. It is predicted that the pound will settle at an exchange rate of around $1.10 by 2023.
Bitcoin at US$50,000
Speculation will drive the price of Bitcoin to at least $50,000 during 2018. This will drive down the amount of commercial use for transaction purposes, as coin holders will hang on to them as an appreciating asset.
Within the next 2 years, it is expected that China will announce its own government-backed digital currency. This will see rapid adoption by a number of countries that will also outlaw Bitcoin and its rivals.
By 2023, the price of Bitcoin, like many other competitors, will decline sharply as it returns to its role as just another digital currency, predominantly used for trading purposes. If so, huge losses will be incurred byindividuals, investment funds, and even countries who invested heavily in Bitcoin on the way up, but didn’t sell out their positions quickly enough before the crash.
The artificial economist
Around the world, AI programmes will outperform economists, analysts, and stock pickers in predicting what will happen to major stock markets, exchange rates, GDP figures, and bank base rates across the major economies by the end of 2018.
Over the next few years, the number of new AI-powered FinTech funds will at first proliferate, and then plateau and decline, with most outperforming the market and some delivering unprecedented returns to investors.
A wave of consolidations, mergers, and closures is likely to follow. By 2023, AI will run central to the management of more than half of the major public investment funds, unit trusts, and investment trusts in the largest economies.
Globally, we will also see AI being given a seat on investment bank boards, central bank advisory boards and monetary policy committees.
During 2018 it is predicted that a robot equipped with AI will be used by a major news channel in the Middle East to work alongside a human reading out the daily news and interviewing guests.
As media budgets come under pressure in the increasingly automated world of 2023, the ‘robo-casters’ have become commonplace in broadcast news services and online channels.
While we may want it to sound like Meryl Streep, Stephen Hawking or Beyoncé, AI has been fed thousands of hours of news reporting to flawlessly mimic the serious and situationally appropriate tone of a human newscaster.
In 2018, we will see pilot schemes to test fully autonomous electric vehicles on the road in normal driving conditions. It is expected that China will be the first to have driverless cars driving alongside human-operated vehicles on a regular basis.
As these cars become a new status symbol, vehicle pollution in cities like Beijing will start to decline demonstrably as the growing Chinese middle-class flocks to purchase their first autonomous vehicle.
Driven in part by the targets in the Paris climate agreement, more than 25 countries will have fully functional driverless green energy vehicles available for sale or hire by 2023. By then we could also see the first city authority introduce restrictions on manually driven cars in favour of autonomous vehicles.
Globally, 2018 sees a spate of openings of fully automated ‘robo-stores’ in which customers either wave-and-pay, or they are identified through facial recognition and their account is debited automatically.
Robots serve customers, re-stock shelves, and self-organise to change displays rapidly, based on analysis of recent visitor and buyer behaviours.
Home delivery can also be arranged using drones and pavement delivery robots. The automation of retail will accelerate over the next few years and, by 2023, entire shopping malls may promote themselves as fully automated. Human store staff will remain to act as personal shoppers and customer advisers – powered by deep insight provided by the in-store AI systems.
Clearly there are both economic risks and opportunities in the next five years. Although it’s impossible to predict 100% accurately what will happen and how an individual business may be affected, the above scenarios can form the basis of initial economic planning.
By understanding the direction of the future and the likely milestones along the way, financial directors can plan for a variety of outcomes and ensure that the business is best placed to weather any storms and spot openings as they start to appear.