The year ahead: 2024 predictions

From AI to the future of the global economy, AMBS academics share their views on what we might expect in 2024.

This year, with inflation falling substantially, increased consumer and business confidence should start coming through in the economy. If real wages continue to rise, this should hopefully filter though to increased consumer spending and eventually a growing economy. We could also possibly see a cut in interest rates sooner than expected, maybe even in the first six months of the year.

What sectors of the economy should we watch out for in 2024? Well, the banking and finance sectors look attractive with increased spending and developments in fintech, as does healthcare given our rising ageing population and increased presence of chronic diseases. Companies involved in the development of new drugs for these diseases will excel, and innovation will be a key driver.

AI and advanced technology will play a huge part in 2024 and will be a key driver in how finance is developed given that AI can process a large amount of data and also help detect financial crime. AI will also play a large part in the growth of robo-advisors and personalised investment advice.

Sustainability is an increasingly important area that will keep on being a driving force for companies and investment decisions. Climate change is top of the agenda but it is about impact, not just change. Regulations should be helpful and not hindering, and I expect to see a more standardised approach in how companies report their sustainability initiatives.

For instance, an e-commerce company might track data from the complete customer journey and develop conversational analytics to better understand customer experiences. A port for transport might integrate real-time data from various sources, such as ferry operations, in-port activities and strategic road networks into a data factory and deploy AI solutions to improve operations efficiency and productivity.

With data being generated in unprecedented volumes, the process of managing and analysing it is a huge challenge, especially for SMEs. There will probably be an increasing shift towards ‘off-the-shelf” AI solutions and conversational analytics. There will also be more regulatory elements around data analytics and AI in business and management, such as data protection, AI regulation, trustworthiness, safety and ethics. As human decision makers and AI can both be processors of data, it is also crucial to develop the synergy of human expertise, AI and data analytics to support augmented decisions and optimise business value.

Inflation will hopefully continue to ease, but even if it does the cost-of-living crisis will continue as the loss in real income is baked in for years now. It will extend further into the middle class as more and more mortgage deals run out and reset to the new higher rates. We will continue to see poverty issues, as economic distress at the bottom of the economic pyramid causes predictable social and mental health distress.

Some of this pain will pass along to businesses - as our economist friends tell us, one person's expenditure is another person's income. If people don't have money to spend then retailers won't have customers to give them revenue. The winners in this will continue to be discount retailers, who will continue to lock in lasting loyalty from the cohorts of customers who have mentally adjusted to these economic conditions.

This vicious cycle will be hard to break out of. Not impossible, but it is a wicked problem in the short and medium run unless outside events intervene dramatically. And on that, who knows. We clearly live in interesting times.

Students continue to take advantage of work placements and volunteering opportunities too, and ensuring employability is embedded in every module should be a key priority for 2024 so that our students achieve their career potential in tough economic times.

AI assistance gives us the opportunity to rethink assessments, increasing their authenticity, but also creates unique challenges for our students to show us their best work. AI is tool we can all use to help us develop intellectually and this is something we need to learn how to use effectively alongside our students.

I think 2024 will bring increased use of AI assistance in the classroom and the professional scepticism which goes hand in hand with this. Students will need to be shown the importance for strong foundational core knowledge so that they can critically evaluate information, which includes critically ignoring evidence which is biased and not credible.

I’m hopeful that this year will bring increased focus on sustainability in all our teaching too. The Financial Reporting Council forum hosted by AMBS in November was a great example of how we can bring people together to share best practice. This year will see more of us here at the School leading the way on working together and focusing on making the world a more sustainable place.

We are likely to see less investment in big infrastructure projects by government (e.g. HS2), businesses considering significant ‘downsizing’ and restructuring activities and, as a consequence, increasingly high levels of job insecurity among the UK workforce.

This doom and gloom scenario is highly likely at the beginning of the year. But the coming general election and widespread predictions of a new and very different government with a green industrial strategy, greater investment in infrastructure (such as the NHS), and a clean slate in terms of government policy towards our trading relationship with Europe and the US, could begin to turn pessimism into optimism.

From an occupational health psychology point of view, we are also likely to see increasing levels of presenteeism and a movement away from hybrid working, as people feel the need to show ‘facetime’ in the office, not only to demonstrate their commitment but also to judge the ‘lay of land’ in terms of possible redundancies in these difficult economic times.

The productivity growth rate in 2024 is likely to be less than 0.5% while the rise in worker hours will end up at 0.5% at best. This will keep the growth rate of the economy in 2024 clearly below 1%. With the economy being trapped in stagflation and vulnerable to global and domestic political and economic disturbances, there is just not enough firepower to see any credible path to a sustained productivity revival happen within the year. Productivity is a long-term work requiring commitment and perseverance.

Being an election year, 2024 is more likely to be a year of promises than real action. Still, this can either be a year of fruitful transition or another one of missed opportunities. The prize of productivity gains can however be made visible in 2024 in various ways. First, the Chancellor’s welcome replacement of the super-deduction capital allowance with a permanent scheme for full and permanent expensing can now be complemented by a commitment to long-term capital spending in the public sector, especially in healthcare and transportation.

Second, Local Skills Improvement plans and Help to Grow programmes should receive continued support and strengthening from any party aiming to form a new government, so that diffusion of technology and innovation will be prioritised. And third, the commitment to levelling up and devolution should not be watered down. Without it, too few places across the UK would benefit, and growth cannot be as inclusive as is needed.

In 2024, we will see Local Resilience Forums, the multi-agency partnerships that have responsibility for preparing for disruptions, developing new ways of connecting with their networks, organisations, community groups, and individuals who need to enhance their resilience to disruptions. These disruptions will continue to disturb our environments and resilience will continue to be at the forefront of the national conversation about how to make our country better prepared for the future.

To prepare we need to understand essential needs wherever they appear, and by whoever they are held. Understanding more about those needs will enable stronger preparation, response, and recovery from a disruption. Vulnerable people in our communities are another important grouping where their essential needs are critical and support can be provided from other parts of society (through volunteering and community emergency hubs).

Businesses that provide essential services will be critical, continuing to provide healthcare and digital services so relied on in a disruption. How we understand the essential needs of these businesses will come into sharp focus as their business continuity will, in part, depend on the continuity of the society on which they depend.

We saw a significant and growing number of firm failures in the past year and the construction sector accounted for one in five firms entering administration in the UK, and they are likely to hold the lead this year too. It is an incredibly challenging sector and the headwinds – including high interest rates, inflation, labour shortages and growing NIMBYism – are compounded by systemic risks, such as challenges in gaining land use and planning approvals in a timely and predictable manner.

With millions of Britons in unsuitable housing and housebuilding targets that have been missed – by a wide margin – year after year for decades, the situation is quite dire.

Ever the optimist though, I do see hope. I see modernisation of construction gaining traction and benefiting from the passion of tremendously talented individuals across the sector. The government is working to support their efforts and I hope it will double down on supporting advancements that will deliver more quality homes faster and will help to drive more innovation in the sector. With new homes standards rising to meet the needs of a transition to net zero carbon emissions, it is the right time to bring forward important improvements in new housing across the UK.

However, driven by increased consumer confidence and still some pent-up demand, I am expecting some bounce back of the physical store. Consumers are increasingly looking for inspirational shopping experiences, which is still a stronghold of physical retailing. However, positive developments for store-based retailers are not inevitable. To succeed, retailers should focus on inspiring customers by creating an immersive, personalised shopping atmosphere, offering unique value propositions and by making better use of their most expensive asset - their staff. Our research has shown that empowering employees at the frontline and equipping them with the latest technology will not only increase customer inspiration and loyalty, but also the financial performance of the store.

Apart from some resurgence of the physical store, I am also expecting a strong showing of online retailing, this time with a twist. It looks as if retailers like Shein or Temu with their unique business model of doing away with big, regional warehouses, and instead sending products more of less directly from factories to end customers, will likely take further market share.

If there are no major changes to the regulatory environment (such as customs duty thresholds), it looks like these players will take market share from established online retailers but less so from physical retailers.

This seems to be reflected in The Virgin Startup Barometer data which has found that most founders are positive about prospects for 2024 and many are planning on recruiting new staff, although there is still a sense that underrepresented groups are not supported as well as they could be.

Unfortunately, the cost-of-living crisis will still be a worry for many and whilst inflation is decreasing it is still high, and global conflicts will also likely cause raised oil prices to feed into increased costs for many.

With a general election due, it is possible there will be more tax cuts on offer from our current record high tax burden which will be welcomed by small businesses. Some are already due to take effect for the self-employed with class 4 National Insurance contributions for the self-employed reduced from 9% to 8% and with the abolition of the need to also pay class 2 National Insurance. The improvement in terms for the Seed Enterprise Investment Scheme (SEIS) in 2023 was also useful for start-ups and should continue to benefit entrepreneurs in 2024.

There will also be new help in the form of AI which might be able to manage a lot of the time-consuming tasks that entrepreneurs currently deal with, making life a little easier for start-up founders.

The fracture has caused a massive reappraisal of the architecture of global value chains by multinationals, and this is likely to accelerate as cost pressures, government restrictions and increasing social pressures are put on managements of multinationals to conform to improved labour standards throughout their value chains.

This will lead to further reappraisals of ownership and location strategies and the return of political risk as a major agenda item (and expenditure) in boardrooms. However, decoupling from China by western firms will prove to be no easy task and the EU is suggesting “de-risking” as a less severe alternative.

This means gradual withdrawal but also hedging and diversification as medium-term expedients. As always, wait and see (and information gathering) strategies are prudent. This gradualism will not however be possible in sensitive sectors where techno-nationalism is gaining ground in international business diplomacy and policies. The notion of sensitive industries is spreading from defence and microchips to wider spheres, exacerbated by the outbreaks of war in pinch points for commerce across the globe.

So multinationals will simultaneously face increasingly intensive competition in key markets, growing regulation from governments to achieve national objectives at the expense of international goals, and an increasingly insistent demand from civil society to achieve real gains in agendas such as the climate crisis, inequality, the elimination of modern slavery across their value chains, and ESG targets.

2022 guidance from the Treasury recognises that VfM is a “balanced judgement about finding the best way to use public resources to deliver policy objectives”, and that VfM is “not just about a benefit cost ratio”. But the same guidance states that “for appraisal to be effective, policy objectives must be SMART - Specific, Measurable, Achievable, Realistic and Time limited.”

VfM and SMART are in tension because we lack evidence and novel methods to measure in money terms the perception of social and environmental value from investments in infrastructure, as well as the value of specific investments to mitigate social and environmental disbenefits.

As well as this, Treasury guidance on estimated project costs (in the absence of robust primary evidence) relies on a social construct called “optimism bias” which assumes budget overruns are rooted in a “tendency for project appraisers to be overly optimistic”. But this assumption has been refuted scientifically because it ignores the fact that society will not let big projects go ahead unless their purpose broadens.

Institutions take a long time to modernise because they are rooted in deep-seated models, and often change is resisted by powerful actors who may fear it will make them less powerful and undermine their own vested interests. But perhaps the need for change in this whole area will finally gain momentum in 2024.

When talking about AI for good just look at the amazing example of the Mana Badi Nadu Nedu programme in India (Andhra Pradesh). This project reduced girl child dropouts in schools with automated sanitation inspection and covers 45,000 government schools serving more than five million children.

The programme transformed daily manual inspection of toilet facilities into an automated process where a designated person took pictures of the toilet facilities through a simple mobile image recognition app. An AI based large language model then assessed the level of cleanliness by analysing the daily pictures and provided a real-time online report, while also triggering a workflow to initiate cleaning supplies procurement. The programme reduced dropout rates by 85,000 girls within a year and can now be easily expanded both in and outside India.

So my question is simple. What can your organisation do? What can you do by adopting AI for good? I wish you lots of inspiration in exploring opportunities in the year to come!