PREDICTING the future may be considered either brave or foolhardy and even more so when it comes to politics and the economy.
Nevertheless, the IoD’s policy team each year makes a series of predictions of what the 12 months will bring and has had some notable successes in the past, including predicting that Theresa May would trigger Article 50 in 2017.
For businesses, we see 2018 as being a year of great changes for companies, characterised by both uncertainty and a determination to succeed.
Many of our members have started the year feeling considerably more optimistic than might be expected, thanks, in part, to the economy performing much better in 2017 that had been predicted by many forecasters.
That said, investment prospects will be subdued, largely due to political uncertainties and it is against this backdrop that companies are looking to our political leaders for reassurance on the Brexit process.
A key priority for business leaders will be the progression of the second phase of talks, particularly towards the announcement of a transition trade deal.
It is imperative, we believe, that such an agreement is announced by the end of March to provide some much-needed clarity and allow some breathing space beyond the March 2019 date for the UK’s exit from the EU.
Another of the key elements for discussion during this phase of the process is to what extent UK regulation will diverge from the EU after Brexit. The question brings to light a central trade-off: while more flexibility in setting regulations could help in future trade deals outside the EU, UK businesses want to avoid barriers that make trade with the EU more challenging.
We don’t expect this question to be resolved in 2018 but the answer will have particular resonance in Northern Ireland where there are already long-stand and strong binding agreements with the Republic of Ireland around the all-island economy.
There are, therefore, existing templates for cross-border co-ordination and co-operation such as the electricity market which must be maintained post-Brexit.
Concerns around Brexit have also resulted in many of our members telling us of growing difficulties recruiting staff, especially those that rely on specific skills to support their expansion plans.
Unfortunately, this is a trend we expect to see worsen in the months ahead with skills from countries outside the UK to be in shorter supply in 2018. As a result, it is anticipated net migration, which fell in the 12 months following the EU referendum, will fall by at least another 50,000 in 2018, from the current level of 230,000.
Aside from Brexit, we anticipate a year of significant developments when it comes to employment and tax. More legal challenges are likely to be brought by trade unions against gig economy companies, as was seen with Uber and Deliveroo in 2017.
Our members are telling us that they want greater clarity from the Government on where the boundary lies between employees and the self-employed, however we are unfortunately, not predicting this clarity will be given in 2018.
Aside from rights on holiday and sick pay, the other major distinction marking out self-employment is tax which has become a politically charged area with the growth of flexible employment in recent years.
So far, however, the Government hasn’t taken any action and the Chancellor Philip Hammond backed down in the face of a tabloid-led campaign against his plan to raise class 4 national insurance contributions last March, while tax was kept out of the remit of Matthew Taylor’s recent review of modern employment practices.
The issue isn’t likely to go away though, and we believe the Chancellor will launch a new consultation on employment taxes at the budget in the autumn, attempting to build support for a change in the law.
Despite ongoing challenges facing businesses, however, we will continue to support our ambitious firms as they face them with resilience and a determination to seek new markets, create new products and services and make them a success.
:: Kirsty McManus is national director of the Institute of Directors (IoD) in Northern Ireland
