SEC Newgate UK’s Outlook for 2022

By members of the SEC Newgate UK team

At the end of another tumultuous year socially, politically, economically and environmentally, we asked our colleagues for their views on the themes that are likely to dominate in 2022.   

The collective sigh of relief that greeted the end of 2020 could scarcely have prepared us for another year of challenge (and some celebration) that has played out. The roll-out of the vaccine and opening of the economy, the optimism that business was recovering better than feared now shadowed by concerns about whether Omicon will put us back into lockdowns. 

The death of HRH the Duke of Edinburgh underscored a feeling that we are seeing a generational changing of the guard; the huge focus of diplomatic, corporate and activist activity around COP26; ongoing debate about the role of technology in our lives and the restrictions placed around it; renewed geopolitical power playing causing increasing levels of disquiet and potential for conflict; the election of Joe Biden and promises that ‘America is back’; the horrific aftermath of the withdraw from Afghanistan. All these have marked a year of challenge and change. 

Looking forward to 2022 all these elements will shape how the next 12 months pan out and inevitably and sadly, it looks like Covid-19 and its variants will have a long tail well into 2022. So, if we’re to grasp 2022 and extract opportunity as well as challenge from it, what are the trends we need to be watching as we plan ahead?  

SEC Newgate UK CEO Emma Kane says: “Next year there will be greater sense of purpose and a significant focus on ESG without which companies will become un-investible in.  We will also see a substantial uplift in budget allocated to employee engagement to counter the ‘great resignation’.  There will be an uplift in technology spend to support scarcity of human resources and need to operate virtually.” 

A former Conservative Special Adviser Fraser Raleigh expects “The PM to attempt (again) to control his political destiny, but Omicron, inflation and his backbenchers will have more control than ever.

Starmer’s new look team will try to look like a government in waiting – if they can build a poll lead on merit not unforced Conservative errors.

He concludes that: “Post-Brexit tension over borders will return if the government disapplies the protocol and Sinn Fein win May’s Stormont election.”  

Building on this political analysis, Mark Glover, Chair of SEC Newgate UK expects to see Labour making gains; in his view, we should expect to see: “An ‘on average’ increase in the share of vote for Labour in the polls, as people move on from the Corbyn era but want to express discontent with Boris Johnson.” In wider trends he predicts: “continuing increase in the uptake of electric vehicles as the infrastructure catches up with demand, whilst mass production and new innovations make them more affordable” and (looking at wider trends in communications) “a focus on evidenced-based news as people question ever more what they read on twitter.”  

Looking more widely, Alistair KellieCo-Head of Communications says: “I hope that we will see more collaboration in 2022.  The last few years have been dominated by a range of divisive issues which have split families and workplaces.  The amazing efforts of organisations and governments to work together to roll-out various vaccines has been staggering.  With the climate emergency now at our doorsteps, even closer collaboration is required between businesses, investors, policy-makers, regulators and consumers.  We all need to play our part, however small.”  

Looking at the impact of macro events on individuals Ian Silvera said: “Inflation will become the major theme of 2022. Central banks and governments will have to tread carefully, with savers and investors changing their perspectives if interest rates go up considerably. This could trigger a considerable pull-back on the capital markets, but insurgent industries – like crypto – could springboard off such a macro-economic environment.” 

On the impact of macro themes on individuals,  Alistair Kellie says: “Talent retention and attraction will continue to be a massive challenge next year.  After the ‘great resignation’ of 2021, there are growing concerns by some experts that 2022 could see a surge in health-related issues associated with longer working hours, increased pressure, less social interaction and interrupted holidays.  Many companies are already putting in place a raft of measures to support staff and to make the place of work as appealing as possible.  Hybrid and agile working is here to stay, but it must work for the employer as well as the employee.” 

ESG & purpose 

2021 was a transformational year for the environment. While COP26 was criticised for failing to deliver all its objectives it did for the first time unite countries on the need to come back with detailed carbon reduction plans to keep global warming to 1.5C, and formally marked the start of the end of coal. It also opened the door wide to business as a solution provider to tackling climate change, not just a cause of it. All this sets the framework for COP27, in Egypt in November 2022:  

Andrew Adie, Head of Green & Good said: “COP27 will be a huge focus for the sustainability movement but also for business. The COP26 Glasgow conference saw collective agreement that climate change is a reality (amazingly that’s the first COP where there has been unanimous agreement) and corporates stepped up pledging $130 trillion via Mark Carney’s GFANZ to finance the transition to net zero and drive projects to decarbonise. The conference broadly agreed that we have to do more to cut emissions to keep global warming to within 1.5C but the can for how we do that was kicked down the road to COP27. November in Egypt will be the moment of truth. That sets 2022 in train as a year of intense negotiations around carbon reductions and also preserving nature as a carbon sink and source for biodiversity.  

“It also sets 2022 up as a year of intense transformation for business as organisations demonstrate that they are part of this transition to a net zero economy. This will bring huge commercial opportunity and potential for investment and also huge risk, as stakeholders reassess their views of businesses and brands and corporates face fresh scrutiny for greenwashing, ethics washing and reputation laundering based on the claims and work they do to promote their ESG performance and purpose.”

On that scrutiny,  Alistair Kellie says: “Authenticity and purpose will lie at the heart of corporate communications in 2022.  It’s not enough for organisations to ‘say’, they must also ‘do’.  Investors, consumers and business partners are becoming far more discerning and expect substance, not soundbites.” 

Scrutiny of business will therefore continue to grow, Sophie Morello says: “With businesses having to report on their environmental impact, there will be a whole wealth of information for media, customers, shareholders and activists to scrutinise.  The pressure to demonstrate meaningful progress against science-based targets will grow, as anything less will be considered greenwash. Any complacency around sustainability reporting could potentially pose a serious reputational risk. And with COP15 (the UN biodiversity convention) expected to conclude in 2022, which aims to protect nature through international commitments, the impact of businesses and supply chains on the natural world will also be a major theme.” 

Dafydd Rees, a former broadcast journalist and member of the Green and Good team adds: “Hard truths await business and finance next year in delivering on the climate change agenda. Over the next 12 months pressure will be applied from several fronts to prove green pledges are made reality. Alongside the fossil fuels industry, the financial services sector is firmly in the spotlight. In 2022 divestment, shareholder activism and greater regulatory scrutiny will become mainstream concerns.”  

He concludes: “The media and policymakers are questioning the reliability of ESG ratings and highlighting a need for standardisation. A lack of agreement about methodologies and inputs has become increasingly apparent and left investors confused. Some of the world’s largest pension funds and institutional investors are hardening their stance and signalling a readiness to divest.

Consumer and social trends 

Over the next 12 months and beyond, there are a range of social and consumer trends that we expect to rise in prominence.  These include the rise of micro and nano influencers, an increased focus on nurturing people and further interest in plant-based food. 

Paul McCaffrey, Head of Consumer said: “Consumer brands will look for influencers with niche followings rather than the stars who have driven influencer marketing in the past. This will create stronger content that resonates with consumers.  Think focused content with meaning, rather than badging jobs that lack originality. 

“Brands are taking notice of the social climate and will continue to establish greater core values in 2022. Consumers are increasingly aware of brands who ‘walk the walk’ and will focus on those with strong values. 

“Whilst we adapt to hybrid working and the scaling back of events, human connections will play an increasingly important role in 2022. Consumers will want meaningful interactions. Journalists will want to strengthen relationships with comms professionals and collaborative working will play an ever-greater role in the creative process.

That trend towards authenticity and connection is picked up by Jo Kent who says: “With rising consumer focus on sustainability and ethical eating, as well as key calendar dates such as meat-free May and Veganuary gathering pace, plant-based products will go from strength to strength in 2022. 

“Following COP26 and the increasing awareness of the environment, I expect more consumers will start to consider the impact of their personal purchasing choices.  

“With Covid-19 forcing many media houses to review their digital offering with a massive rise in digital content and online issues, we’re likely to see more of a digital first approach to media publishing.” 

Financial services 

Financial services will be hugely impacted by decisions made around interest rates and the impact of any covid restrictions on the economy.  We expect an increase in the number of DIY investment platforms (including crypto and other digital assets) and propositions from new digital, tech-savvy service providers. 

Henry Adefope, says “Supply will increasingly meet demand for a new generation of investors who have little trust for institutions that manage finances.  Many Gen X and Y workers have saved even more cash over the last two years, platforms will continue to roll out to capture this retail investment capital.  

“There will also be a continuation of mergers, acquisitions and overall consolidation within the wealth and asset management industry, both in the UK and globally.   

“Recent research showed over the last decade, nearly half of the firms featuring in the world’s top 500 asset managers have disappeared from the list over the past decade – this trend will not stop anytime soon.” 

Building on this theme of change in the sector, Sara Neidle adds: “We expect to see consolidation increase in 2022, as businesses want to broaden scale and product offering, and stay competitive, as well as being seen as a ‘one-stop shop’ that caters to a full spectrum of investor needs.” 

A number of high street brands are making clear their intentions to create or engage in financial services propositions. Henry Adefope says: “Big names like John Lewis, Amazon and Alibaba have made their intentions clear regarding entrance into the wealth management realm. Many high street names already offer some kind of bitcoin/crypto payment/settlement, and the level of financial services innovation across non-traditional names, will continue to hike up.” 

That trend is also reflected in the type of investments people are looking for:  Sara Neidle says: “Investors are demanding more on sustainable investing and measurement on ESG impact. As we head into 2022, firms will be competing on developing the necessary ESG capabilities to retain investors. 

Covid has accelerated the adoption of digital channels where investors want flexibility and choices. To meet these changing needs, firms will need to adapt more to this new way of working, offering a personalised and hybrid model in order to engage the next generation of investors and capture this wall of money.” 

Commenting the UK pensions market, Gareth Jones says there will be more ESG scrutiny, increased regulation and a greater focus on DC pension schemes: “2021 saw the introduction of new rules for climate reporting for large pensions schemes and we should expect further rules and scrutiny for UK pensions in the coming 12 months – with pressure to ensure that their activities (such as stewardship and divestment) are consistent with net zero

“Employers and pension scheme trustees should expect to see tighter regulatory scrutiny on how their schemes are funded in 2022, with new powers from the Pension Schemes Bill coming into force and the TPR consulting on its new funding code.

“The past 12-18 months has seen substantial reform to the DB pension landscape, but policymakers appear to be turning attention to DC schemes, with the potential introduction of new rules on how people’s pensions are invested (e.g. with the charge cap changes) and how consumers access and manage their pension savings, with the upcoming introduction of pension dashboards.”

The personal finance market will also see the impact of huge changes in 2022: Vanessa Chance says: “The FCA ban on ‘price walking’ in January will have huge ramifications for the insurance sector. Not only will insurers have to radically re-think their pricing strategies but the whole aggregator industry, which is based on consumers shopping around, will have to re-position itself towards adding value to remain relevant.

“The long overdue Bank of England rate rise at the end of 2021 will see the record low mortgage deals disappear from the market again, however it could be good news for savers as although the changes will be slower to take effect, we may see rates improve slightly.” 

Property 

As a bell weather for consumer confidence and the economic outlook, the property market will be under close scrutiny in 2022, so what can we expect? Should we expect to see significant changes in the market and does it matter if we do?  

Polly Warrack says: “Real estate is fundamentally a long-term investment. It tends not to be bothered by short-term scares and is often treated as an inflation hedge as a result. Therefore. its biggest issue every year remains the same – are buildings fit for purpose? The key determinant of this next year and in the years ahead will undoubtedly be ESG.”  

On that transition to net zero, Debbie Standen says: “Property brands and businesses will face the same increased media, consumer and stakeholder scrutiny as other sectors in relation to ESG credentials, which are set to remain high on the agenda. Claims will need to be underpinned by meaningful, tangible action and there’s a real opportunity for many to set themselves apart.

“The race for space has eased but is set to remain a consumer driver. However, towns and cities are regaining their lustre, with several media already reporting on the ‘boomerang buyers’ returning to urban life. A combination of the ideals of out-of-town living not matching reality and cities’ adapted live and work offerings coming to fruition, it’s expected to grow as a trend.

These trends will also place pressure on the planning system, with Perry Miller, Head of London Office for Local Advocacy commenting: “The performance of the planning system will continue to decline as local authorities and government agencies are starved of resources. 

“The government finally addresses the plight of leaseholders by adopting a holistic approach to fire safety and a package of financial support. 

“Conservative MPs will take an increasingly hostile approach to proposed development in the wake of falling poll numbers.” 

Technology

The move to home working and the acceleration of trends towards ecommerce and gathering pace of innovations in areas like blockchain, AI, and the metaverse all set to continue driving technological transformation into 2022:  

Ian Silvera comments: “A potential shoot-out is looming between Ethereum and its alternatives, namely Cardano, Algorand, Avalanche and Solana, as to the fastest, most reliable and easy-to-adopt smart contract network. Ethereum’s head start with its extensive ecosystem may wane. Elsewhere, there is existing momentum that play-to-earn gaming will overtake NFTs as the new craze influencers generate buzz about.” 

Retail

Retail will also see huge changes in 2022, with Omicron already seeing a reduction in footfall and the spectre of more restrictive measures hanging over the sector just at the point when it had started to show signs of recovery. For retail, 2022 already looks concerning:  

Clotilde Gros: “2021 has been an incredibly challenging year for retail, from restrictions linked to Covid, supply chain issues or continued concerns about the future of stores. As we move into the new year, I believe we will see changes as brands try to mitigate these ongoing issues but also navigate the shifts in consumer behaviours. 

“2021 has brought the hospitality sector to its knees from the start right to the end of the year when “Christmas was cancelled”. Whilst the industry is hoping for recovery in 2022, other challenges such as return to 20% VAT in April will come into play.”

We wish you all the best for 2022!