Nate Silver, the American pollster, made his name by correctly predicting the winner of 49 of 50 US states in the 2008 Presidential Election, and followed up by calling all 50 states right in 2012. It couldn’t last forever.
He made Clinton strong favourite in 2016, giving Trump only a 29 per cent chance of success. The story tell us something about how the human brain judges probability. Trump winning seemed unimaginable to most journalists and politicos, who mentally dismissed 29 as a small chance. But in your everyday life, if an outcome happened nearly a third of the time – such as the supermarket being out of milk – you would probably think that was quite often.
So the next section of this piece comes with a health warning that all predictions should be treated as things that have a reasonable chance of happening, rather than dead certs. If that sounds like I’m hedging my bets, it’s because I am. The policy team at the IoD has taken at look at a range different areas that affect businesses, and come up with 14 trends or events that directors should look out for this year. Some are about specific industries, while others relate to political developments. You can read all of the predictions here, but these are some of the most eye-catching.
The economy seems to have performed better in 2017 than many forecasters had predicted, although at the Budget in November the Office for Budget Responsibility said they still expected GDP growth to slow over the next five years. There have been some bright spots, with manufacturing, for example, growing for five consecutive months up to September, the last month for which we have official data. Tej Parikh, the IoD’s Senior Economist predicts one change coming in 2018 is that London, which has long outperformed the UK average, will fall behind. Brexit uncertainty is likely to be particularly felt in financial services in the Capital, while manufacturing, which benefits from the lower pound, is largely found outside of the South East.
The London economy is also highly dependent on skills from outside the UK, which Seamus Nevin, our Head of Policy Research, thinks will be in shorter supply in 2018. Net migration fell in the 12 months following the EU referendum, and Nevin nails his colours to the mast by predicting it will fall by at least another 50,000 in 2018, from the current level of 230,000. This will get the Government closer to reaching their net target of 100,000 a year, but cause problems for many IoD members, who need
s workers with specific skills to make expansion possible.
Against this backdrop, companies are looking to our political leaders for reassurance on the Brexit process. Allie Renison, the IoD’s Head of EU and Trade Policy predicts that the Government will reach political agreement with the EU in the next three months on a deal for a transition period after Brexit day in March 2019 – but this is definitely nowhere near with 100 per cent certainty. For all of the talk recently of ‘no-deal’ Brexit, Renison says that over 2018 we will see the UK government putting mechanisms in place that make it possible to cooperate with the EU on rules and regulations, at least for immediately after we leave.
Leaving Brexit aside, 2018 is likely to be a year of significant developments when it comes to employment and tax, two big areas for business. Nevin predicts that there will be more legal challenges brought by trade unions against gig economy companies, as we saw with Uber and Deliveroo in 2017. Much of the problem relates to the legal grey area on what divides employees from the self-employed. IoD members have said they want greater clarity from the Government on where this boundary lies. Unfortunately, we are not predicting this clarity will be given in 2018, which will mean the uncertainty for employers and employees continues.
Aside from rights on holiday and sick pay, the other major distinction marking out self-employment is tax. This has become a politically charged area with the growth of flexible employment in recent years, but so far, the Government has shied away from action. Philip Hammond backed down in the face of a tabloid-led campaign against his plan to raise Class 4 National Insurance contributions last March, and tax was kept out of the remit of Matthew Taylor’s recent review of modern employment practices. Stephen Herring, the IoD’s Head of Taxation, believes the issue hasn’t gone away, however, predicting the Chancellor will launch a consultation on employment taxes at the Budget in the Autumn, attempting to build support for a change in the law.
With all of this on the horizon, it will be a busy year for business, but there may also be moments of excitement. The IoD’s Infrastructure Policy Advisor, Dan Lewis, thinks that 2018 will see the first people flying from a reusable space vehicle. The likely candidate is a company called Blue Origin, with their New Shephard rocket, which was first tested in 2015. The company, owned by Jeff Bezos, wants to put astronauts in its vertical take-off and landing vehicle this year, to be followed quickly by space tourists. Space flight may be the plaything of billionaires at the moment, but the Government has had plans for a spaceport in the UK for a few years, and 2018 could be the year for a big step forward for commercial space exploration.
To end on this high note, it’s important to remember that despite the challenges businesses face this year, there are plenty of companies out there with exciting ideas and the determination to make them reality.
14 Predictions for 2018
Edwin Morgan, Interim Director of Policy, IoD
Edwin Morgan is Interim Director of Policy at the Institute of Directors. He joined the IoD shortly after the 2010 General Election.
He has represented the interests of the Institute’s 30,000 members through the ups and downs of the Coalition Government. Alongside the IoD’s team of policy experts, Edwin is responsible for making the case in the media for competitive markets and a business environment which enables job creation and economic growth.