Comment: ‘Projections are not destiny’: what can we learn from the World Economic Forum 2024?
As the global elite defrost their feet from their annual trip to the snow-covered village of Davos after the 54th World Economic Forum (WEF) meeting, the global and UK business communities are left wondering about the year ahead with several questions remaining unanswered.
Whilst the overall sentiment was positive with caveats, particularly from the WEF public affairs team, the undercurrent appeared from the outside one of, ‘we don’t know what’s going to happen, but we are hoping for the best’, in a way that would not upset global stock exchanges.
However, it is reasonable to ask why such positive caution exists given the need to thaw the current economic uncertainty amidst several external factors that continue to cause the nearly 3,000 leaders in attendance at Davos a headache.
The war between Russia and Ukraine has shown no significant signs of a resolution one way or another with neither side appearing able or willing to break the deadlock. Russian President Vladimir Putin’s next move will play an important role as he remains committed to achieving his objectives while observing developments in the Middle East.
Meanwhile disruptions to supply chains arising from the Red Sea has already caused Tesla to halt production at its Berlin plant. The threat of aggression by China toward Taiwan looks ominous also. With the US supplying Ukraine and holding the line in the Red Sea, attention is well and truly diverted from the Taiwan straits. China President Xi Jinping will be keeping a watchful eye and be ever mindful of this year’s United States presidential election primaries ahead of the decisive election in November 2025.
The cold breeze of economic uncertainty at a global level is also playing havoc with UK business scenario planning as mixed messages from economists, lenders and central banks make the task harder still. UK house prices were expected to fall in 2024 by 4-to-5% according to most analysts at the start of January. But by the end of the month these forecasts had reversed themselves and now they are predicting house price increases of around 4%. What a difference a month makes.
However, many economic indicators are still struggling to provide any real confidence. Data from the Bank of England has estimated that mortgage arrears now total around £18.8bn in the three months to September. Despite disposable income having grown to its highest peak in the last two years, but down in comparison to pre-Covid times, Christmas sales figures were disappointing. The Covid savings bump has ended and many credit cards have been maxed out resulting in improved earnings for the pawn sector and growing lines at foodbanks. Major retailers are expecting wage inflation to be a major drag on growth over the coming year, with Revolution Bars Group shutting one in ten of its venues to reduce losses before the increase in the national living wage.
Research by Begbies Traynor, a corporate restructuring firm, has found that over 47,000 firms were in financial distress in the last quarter of 2023. Data from the Office for National Statistics and the Insolvency Service report that proposed redundancy figures rose sharply to 58% to 278,149. Insolvencies also rose by 21% in November causing more reasons for concern despite some optimism that the UK will see economic growth of around 0.9% for the year ahead.
Robert Walters, a white-collar recruitment specialist, has announced a 5% reduction in headcount in the three months to December blaming slower economic recovery in China amongst the reasons whilst competitor Hayes Recruitment also cut its workforce by around 600 worldwide. Elsewhere, EY has announced it will be cutting 300 jobs from the UK and making some 3,000 redundancies in its US arm, whilst McKinsey, a management consultancy, is seeking to cut its workforce as it struggles to manage the slowdown in activity in the sector. Both McKinsey and Boston Consulting Group, BCG, have been offering their services free of charge to win contracts and maintain relationships.
National Security Advisor of the United States, Jake Sullivan, approached the multiple global challenges governments face with shared optimism, citing security and cooperation are possible if we, “pull together and make the wise and bold decisions”. Various leaders echoed his sentiments and WEF acknowledged it as one of its “4 things to know” but it is the harsh reality of a fast-changing world and global challenges that should attract greater attention.
Artificial Intelligence was a “hot topic” of the week with calls for accelerating scientific discovery matched by calls for greater governance. There was also a reminder of the climate change crisis and the need to drive greater energy efficiencies with Veronica Nilsson, General Secretary of the Trade Union Advisory Committee to the OECD, making the case for putting people at the heart of the energy transition and not imposing changes on them. Both of these ‘things to know’ were accompanied with various plans and initiatives for advancing AI and tackling climate change.
The final ‘thing to know’ was titled ‘Projections are not destiny’, a politically contentious perspective repeated by Minister of Finance of Saudi Arabia, Mohammed Al-Jadaan, quoting President of the World Bank, Ajay Banga. Such a statement questions the certainty of economic predictions but also offered cause for optimism in some quarters.
Progress or regress?
The direction of the global economy remains unclear following a ‘keep calm and carry on’ approach from WEF leaders and is unlikely to change anytime soon as regional stability is sought in Ukraine and the Middle East. Having nearly 3,000 leaders discuss these matters attempted to bring clarity, but it also carried the pitfalls of ‘design by committee’.
The coming year will provide more twists and turns, especially for the UK as a General Election looms, but, without decision-making power, WEF leaders must come together separately to address and progress common challenges, otherwise the uncertainty and its potentially regressive economic impacts will remain ahead of a return to the Swiss Alps in 2025.
John Hathaway, Senior Lecturer, Strategy and Human Resource Management, School of Business and Law
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