Recent media articles have indicated that the Omicron virus may have peaked, and that we could soon be moving from a pandemic to an endemic status. The likely lifting of virtually all restrictions has been heavily publicised. UK growth has been forecast at between 4% and 5% in 2020, and while this may give reason to party in certain Downing Street circles, storm clouds could still be on the horizon.
Inflation is forecast to grow between 5% and 6% in 2022, its highest level for 30 years, and interest rate rises are likely to follow. This could not only slow down the housing market but also lead to higher prices for goods and services and higher wage demands. Many individuals have already seen their annual pay rises dwarfed by current inflation levels. The major driver of this inflationary pressure is coming from fuel & energy prices, which account for up to a third of this rise, and businesses with disproportionate energy costs will be affected more.
China is still struggling with Omicron, and this in turn could severely impact supply chain lead times in the same way that we saw in 2021. Further disruption has been widely forecast.
The labour market is still highly volatile, with high demands in some areas like construction and manufacturing. Output from these sectors could well be constrained by lack of labour availability, with a report this week showing UK unemployment at just over 4% and comparable to levels to before the pandemic, and open job vacancies at a 20 year high.
Insolvencies are at their highest levels for years, and whilst the hospitality sector in particular is likely to recover significantly in line with fewer COVID restrictions, it has come too late for many businesses.
With economic silver linings and clouds of uncertainty forecast in 2022, strategic planning has never been so important:
- What will your future demand look like?
- What are your competitors doing?
- What are the national and global trends in your industry?
- Are procurement and sourcing decisions likely to change?
- What are your plans around staff resourcing and automation?
- What are your plans for warehouse location and product distribution?
- What is your future transport strategy and cost-to-serve model?
- How will sustainability affect your logistics strategy?
The outlook in 2022 is reasonably robust, but disruption cannot be discounted, and businesses need to prepare with a number of alternative strategies. Davies & Robson can help not only with developing a solid logistics strategy but also in building alternative scenarios in areas that are less certain. This will give clients the ability to change direction quickly if circumstances dictate. Call Davies & Robson on 01327 349 090 for an informal discussion on how we can support your strategic planning.