In an increasingly digital, post-pandemic world, change is constant. But how should we plan for growth and success in an uncertain future?

Gallagher’s recent webinar sought to answer this question. Hosted by Simon Waine, Regional Managing Director, with guest speakers Tom Cheesewright, Applied Futurist and Tom Pugh, Economist at RSM UK, the panel explored current and future UK economic challenges, longer-term trends entering the workplace and steps businesses can take to meet these challenges.

Below we share the highlights, and you can listen on demand to the full webinar here.

The here and nowInsights from RSM’s Tom Pugh

Inflation forecast to fall sharply

We polled the audience, asking: what is your business focus for the next 12 months? Nearly half (48%) said managing inflation and rising costs, while 31% opted for staff recruitment and retention.

The economy has been more resilient than anticipated – rolling blackouts, entire industry shutdowns and deep recession have all been avoided.

Inflation should fall sharply over the next six to 12 months, to roughly 5% by the end of the year and back down to 2% by the middle to end of 20241.

The price of goods originally drove inflation up: energy went from £50 per MWh to £1000 per MWh, and it is now back down to £90 per MWh. The cost of shipping a container from China to Europe went from USD 1,500 to USD 15,000, and it has now returned to USD 1,500. These significant price drops will drag headline inflation down.

Service inflation, which relates to the labour market, is more concerning and is likely to be stickier over the next six months before falling late next year. There are concerns there may be more interest rate hikes on the horizon.

Labour shortages – where have all the workers gone?

In our view, the main reason the labour market is so challenging is lack of supply, due to the number of people dropping out of the workforce. UK employment levels have only just returned to pre-pandemic levels, in comparison, the US and many countries in Europe reached their pre-pandemic rate some time ago.

Therefore, the UK has a supply issue, and the question is, where have all these people gone? There has been a huge rise in the number of people not working because they are sick – 520,000 extra people aren’t working due to ill-health since the start of the pandemic – roughly 1.5% of the UK workforce2. This trend hasn’t been mirrored in other developed countries and is a key reason why inflation is higher in the UK and GDP growth is so weak.

This employee shortfall could be the most important factor impacting the economy currently, and solving this would go a long way to easing inflation.

Pay growth vs disposable income

Nominal pay growth, or salary increase, is roughly 7.3% for the whole economy3. The Bank of England has stated pay growth of around 3% is consistent with 2% inflation and is concerned about a wage-price spiral.

Normally very high pay growth sits alongside a booming economy, but while inflation has dropped to 7.9%, real earnings have been falling rapidly and 2023 is likely to be a record year for negative real earnings4. Despite the labour market tightness and pay growth strength, the economy is barely avoiding recession.

Real household disposable income (RHDI) measures how much spending power households have and has been pretty flat over the last three to four years. The outlook should improve over the next six months to a year. As inflation falls, but the labour market remains strong, RDHI should rise, but the problem is that consumer spending is unlikely to follow suit.

Consumer confidence is still fairly weak, and households are more likely to save than spend any additional income as they remain wary about their economic prospects. Data from the Office of National Statistics shows over half of renters would not be able to afford an unexpected £850 bill, while charity Together Through This Crisis has found that one in four households regularly run out of money for essentials5. The potential surge in interest rates also needs to be factored in, which will continue to impact mortgage and debt repayments.

Corporate finance

Finance for business is becoming more expensive and harder to come by; consequently, there has been a big jump in the number of firms having problems accessing finance. Businesses tend to be free-floating, whereas mortgages can be fixed, and banks are becoming more cautious about loan losses. This is risky for the economy and could push a significant number of firms into insolvency, dampen investment and limit pay rises.

The futureInsights from futurist Tom Cheesewright

How should we think about the future?

In the webinar poll, two-thirds of attendees said they spent at least one day a month thinking about the future, but what does this really mean in practice? And how do we make sure our time is well spent?

Strategically assessing the future in a structured fashion with an open mind is not something we do particularly well. With little demand for training courses on strategy and foresight inside many major organisations, the evidence suggests we aren’t yet teaching people to think about the future properly.

The further a business looks into the future, the less we can rely on data over imagination. When considering two or three years’ time, it’s possible to analyse current data alongside incoming trends and see where the two collide. This process is called intersections – How do the pressures and trends collide? The impact will depend upon how a business responds to it.

What pressures and trends are driving conversations today?

Recruitment and retention of talent is a top concern for many large businesses. We have seen the shift impacting certain industries more where there is a high proportion of over 55s – for example, logistics, transport and construction.

Running contrary to much of the digital scaremongering, currently AI is driving demand for jobs rather than replacing roles, and there is an enormous shortage of people with digital skills.

There has been a fundamental cultural shift in people’s expectations around work and what drives them to work. The priorities and aspirations of 18-35-year-olds have changed quite profoundly, and some previously considered key milestones for early adult life have been shunted back. Even pre-pandemic, the average age people learnt to drive was 26, people are now not buying their first homes until they are 33, and people are also choosing to get married later, if at all.

Therefore there is a growing group of adults who are renting, single and childless, and this has an impact on expectations and desires for work and what people are willing to accept. More than anything, many value time, and many organisations are yet to grasp its importance in attracting and retaining talent.

Environmental, social and governance
A vast majority of businesses have ESG high on the agenda, yet there is some confusion about where the desire is coming from – consumers, employees or regulation. All are likely to be true, and alignment exists between ESG values and more traditional objectives. The major shift is that leaders are more focused on the future, adopting a longer-term approach to ESG and moving away from focusing solely on a three-to-five year plan.

Currently the digital and physical worlds are very separate, but in the next 10 years, people could be looking through a headset rather than at a handset, and this creates enormous opportunity along with huge privacy challenges.

Looking at the evolution of computers, every milestone has made technology more intuitive, accessible and human. The next natural step is to merge the digital and physical world. Any customer service business needs to watch this trend urgently. Large language models have rapidly escalated the accessibility of AI, which is currently capable of two things:

  1. Pattern recognition – analysing large streams of data, looking for failures or anomalies
  2. Pattern replication – looking at large data sets and recreating content in a semi-original fashion based on user input. Businesses should be looking at these tools, but with a healthy dose of scepticism.


Our final attendee poll asked businesses how confident they felt about the next six months – 64% felt fairly confident, 22% very confident and 14% not very confident. Any trepidation felt is entirely understandable. Looking at the immediate future, recession is expected at the start of next year – it would be a historical anomaly to endure interest rates this high without one. Hopefully it will be mild and short, with possibly a 1% fall in GDP.

The future is a lot less daunting when it is planned for. Tom Cheesewright recommends dedicating 1% of your time – which roughly equates to one day every six months – to thinking strategically about the future. Businesses should consider incoming trends, how they may affect business models and what measures could take advantage of new opportunities and insulate the business from emerging risks.

Gallagher is on hand to support your risk management journey – both in the present and well into the future. Don’t hesitate to get in contact if you would like to discuss any issues raised in more detail.


All statistics referenced in this article were given by the speakers in the webinar held on 05.07.2023.

The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.