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2022: A look ahead

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By Paul Styler, Executive Director of Infrastructure Solutions at ETL

Paul - Global Banking | Finance

Paul Styler, Executive Director of Infrastructure Solutions at ETL

2022 is now getting into full swing and talk of proverbial, or actual “green shoots” will soon be seen on the tabloids and screens across the UK.  At this stage, it is difficult to predict if 2022 will be a revisit of 2020 or 2021 or will see the UK and global economy emerge into a post-pandemic normal.  That said, at ETL, we are planning that business as usual will be different. 

From a health perspective, our clients are in recovery mode – catch up and bounce forward.  Commissioners are encouraging service providers to pull out the stops and increase throughput; 2 years of pent-up healthcare demand needs to be satisfied and a political imperative is to see the NHS firing on all cylinders.  Without detracting from the potential unknown and hidden future consequences of lack of early interventions (these will become the issue of the next decade), the focus will be on the improvement of key metrics; long term waits for elective surgery (hips, knees, cataracts); the likes of cancer referral waits, and access to GP and primary care services.

However, whilst we will bask in the uplifting feeling of economic growth, we cannot lose sight of the economic impact of the significant system shock of the last two years.  The exchequer has diverted funds to supporting the working economy, whilst the reduction in taxation revenues has increased governmental borrowing – all of which will need to be serviced and eventually repaid (even if only by further future borrowing through the next political cycle). All of this means that whilst there may be a strong and compelling rationale for investment in public sector services and assets, the public sector will get even less to “invest” than they would normally expect. For the long term, strategic planning of UK Plc has been replaced by a series of mini budgets and sending review resets, and only now is the true picture starting to emerge. 

A direct consequence of this is that major capital expenditure for public service improvements has shrunk to more moderate promises, to reassessment and “cloth cutting” of flagship schemes and in some parts, smoke and mirrors and a lick of paint. Capital planning could soon become a forgotten art as public bodies face a future of making the most of their existing asset base, irrespective of the inherent risks and suitability to the service needs.  The challenge to attract new capital has increased exponentially since Lockdown 1.

After 2 years when the public sector was seen to earn its stripes, under a greater lens of public awareness and scrutiny, and the consequential increase in appreciation of the services delivered, the sector is also in the crosshairs of general economic pressures (inflation at a 30 year high), reduced funding, greater service user expectation and the expectation of the need to adopt technology. All drive service costs upwards and whilst technology was once seen as the saviour of the public purse (allowing more efficient and effective delivery nearer to home), access to the funding to unlock relevant technologies may not be readily available. 

2021 also saw UK host COP26, an expected catalyst for all things to Go Green.  Whilst politicians may argue if Glasgow was a watershed moment or Global greenwashing, the public sector is facing both societal pressures to reduce their footprints and very hard and defined targets to decarbonise their operation.  Therefore 2022 should be the year when we see industry (be it public or private) offer its response and embed decarbonisation throughout its operations.

At the same time, some will identify 2022 as the year that ESG becomes a household term. Public and private sectors alike will need to present the social value credentials – the motives of pure profit are no longer seen as an acceptable rationale for business, but ESG or triple bottom line economics make for a more consumer-friendly outcome.  It is the role of business leaders to present a redirected business proposition and of operational, financial, marketing professionals alike to embed the societal notion to appease customers and investors alike. We are seeing this already as global investors shift portfolios to greener sectors or public causes; we will need to see more micro-level interventions to underpin a sustainable change in the global economic model.

So with the tide of public expectation on industry to make a better societal and economic model, how can this be achieved? There appear no significant levers to engender wholesale changes in how the public sector delivers its outcomes, but more is expected. There is a political focus on reducing the public sector footprint (even if only at a perceived level) and competing demands to the public purse.  So what should we expect from the public sector at a micro level? 2022 will be characterised by squeezing more from every public pound, delivering more, closer to home as efficiently as possible, and consolidating as much of the un-seen as possible to reduce cost and improve efficiency. This, to the public sector, is “more of the same”, more for less, and removal of every level of superfluous need. Focus on doing just enough. A message that could have been overused before the pandemic. As the song goes, “It ain’t what you do, it’s the way that you do it”.

Global Banking & Finance Review

 

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