This article provides a snapshot of the key ones highlighted by CEO of AnotherDay, Jake Hernandez in his session Geopolitics for scale-up companies: America, China, and the Ukraine conflict, part of Gallagher's recent Beyond Today virtual conference.
The fact that we are operating and trading in an increasingly global marketplace was confirmed by a poll within the session, which found that 88% of respondents’ businesses already operated internationally. Therefore, geopolitical risks are a growing concern for the majority of UK businesses. When asked about their opinion on the next 20 years, three-quarters of the audience anticipate being in for a rough ride.
Top five risks to 2030
A conflict over Taiwan disrupts global supply chains for a year or more
According to experts, there is a possibility of a conflict over Taiwan in the year 2027. In the event of such a conflict, global supply chains would be significantly impacted as Taiwan is the leading producer of semiconductors and microchips in the world. This would upend global equity markets, affecting reinsurance capacity, creating huge volatility in D&O and financial institutions markets, and even negatively affecting the value of people’s pensions.
Rising inequality in high/middle-income countries leads to more, and extended, civil unrest
Over the last 10 years, the number of people living in democracies has dropped while the number of autocracies has increased. This has led to increased flashpoints and tension between the two ideologies globally. After WW2, the income share of the world’s richest 1% started to decrease. However, around 1980, this changed and the wealth gap has continued to grow. This inequality fuels civil unrest and has left many countries worried about stability.
Much heavier government regulation slows down UK businesses and reduces investment
Although the UK is emerging from the fallout from Brexit, this doesn’t mean that government regulation is no longer a concern. There are still several areas relating to Brexit that still need to be ironed out and we have recently seen how government regulation regarding energy has dampened investment. The windfall tax led to Ithaca Energy, Shell and TotalEnergies all reviewing their proposed investments this year1.
Western Europe’s growth is hampered as the economic centre of gravity moves east
Economies need to grow to stay stable. It is currently unclear whether Western Europe will be able to maintain an adequate level of growth over the next 20 years when so much economic activity is moving elsewhere.
A Trump administration drastically accelerates US economic protectionism
On November 5, 2024, we will know whether there will be another Trump administration. If he does win the election, he could choose to accelerate closing off the US market to foreign investors and disrupting existing free trade pacts. That would be a huge problem for UK companies, whether they are operating domestically or overseas.
Top five opportunities to 2030
Continued rapid growth in stable pockets of Sub-Saharan Africa
There is a juxtaposition between what people think of Africa historically and what it actually is today. A UK company looking for growth could look to Sub-Saharan Africa as an opportunity – there are jurisdictions which can make it possible to manage associated risk appropriately. A major advantage Africa has is that it is beating the demographic trap. One driver behind China’s rise over the last 30 years has been its population growth. However, China is now in the midst of a population downturn, which has left its government very worried. Nigeria, on the other hand, is experiencing gradual growth, and its population is not expected to peak until 2100.
Ease of doing business in East Asia makes investment opportunities for mid-corps more palatable
Historically Asia has been quite difficult to invest in. Now Asian economies such as Malaysia and Singapore are taking active steps to make it easier to invest. The visa process has been improved and companies can now structure shareholdings that don’t involve local nationals or companies. It is possible to begin an investment journey in East Asia for less than USD100,000 and this throws up lots of opportunities for small to mid-sized UK companies.
Ageing populations create new impetus for heavy investment in healthcare and pharmaceuticals
As our population ages, the economy will present new opportunities to companies as there will be a shift in the makeup of the population. There will be a higher demand for advanced healthcare systems and pharmaceuticals. Therefore, these systems must become more sophisticated to cater to the growing needs of the elderly.
Demographic decline requires huge labour productivity increases, continuing the tech and AI boom
If we have fewer people doing more jobs, it’s going to require huge productivity increases. Technology in AI has exploded this year; 40% of the US publicly-traded stock market is now tech, and investments are only set to increase.
Trillions in net zero and climate adaptation investment becomes available for research and development
We have just experienced the hottest September on record, a worrying indication that climate change is a present and not a future risk. Significant money is entering the economy to tackle this pressing issue – roughly USD900 billion to USD1 trillion per year. How can UK companies capitalise on this? They need to consider how they can be exposed to the energy transition supply chain and make this a business development priority .
Want to learn more? Listen to Jake’s Beyond Today session on demand. If you would like to discuss any of the issues in more detail, please contact your local Gallagher representative. AnotherDay also have a range of case studies and thought leadership on strategic risks on their website, www.another-day.com/.
The content of this article and the webinar is based on information and world events as at 5th October 2023.
