In our last business supplement of the year, BETHANY WALES looks back at the highs, lows, curve balls, and challenges that shaped 2023.
The year began with a healthy dose of pessimism, with the International Monetary Fund predicting that even though global outlooks had improved, the UK was still likely to fall into recession.
Twelve months later, we’ve managed to avoid this worst-case scenario, with the economy instead slipping into a year-long hibernation period.
Many of the same challenges we saw last year hung around for 2023 - costs have been high, confidence has been low, and keeping up with it all has been more than a full-time job.
That being said, there have been some reasons to celebrate too.
The autumn budget bore good news for individuals in the form of tax cuts and an extension of the pension’s triple lock - although plenty of business owners continue to tear their hair out over a business rates system viewed by many as over-complicated and outdated.
And who could forget the bizarre moment we witnessed our prime minister “interview” controversial tech billionaire Elon Musk, who predicted artificial intelligence would usher in an era “where no job is needed”.
With so much to take in, let’s take a look at the defining issues and moments from 2023.
THE LOWS
One of the hardest hit industries in Norfolk was once again the building trade, due to an ongoing ban on new homes in certain parts of the county.
Under the rules, imposed on local councils by Natural England back in 2022, housing developments can’t be granted planning permission until they can prove they won’t contribute to river pollution.
As a result, hundreds of construction companies risk having to close.
Scott Daniels, who owns Danco Building Services, a construction company based in Wroxham, said: “We desperately need work, my boys have mortgages to pay and families to support.
“The big builders are cracking on but the smaller companies like us are being royally shafted.”
It's also been a tough year for the region’s offshore wind industry, with rising costs, supply chain issues, and a lack of government funding wreaking havoc.
Things came to a head in July, when energy giant Vattenfall made the dramatic decision to halt work on one of the UK’s biggest wind farms, Norfolk Boreas, after it said costs had soared by 40pc due to inflation.
Two months later, the industry was dealt another blow, when no new offshore wind farms were secured in the government’s clean energy “Contracts for Difference” auction - despite four in East Anglia being eligible.
Insiders said firms refused to take part because the maximum price they could have charged for the energy generated was too low to keep up with rising costs.
Lisa Christie, Vattenfall’s UK manager, added: “Offshore wind will be the backbone of Britain’s energy generation this century, but the industry has been hit by the perfect storm of huge price increases, the rising cost of capital, and a supply chain squeeze which is increasing competition for manufacturing and installation facilities.”
It is hoped, however, that things will improve on this front in 2024, following an announcement last month that the maximum price at next year's auction will be increased by 66pc.
THE HIGHS
2023 hasn’t been all doom and gloom.
Perhaps the most exciting news of the year for East Anglia came in October, when the long-awaited revamp of Ely junction - crucial for routes into the region - was confirmed by the government.
It came after Rishi Sunak scrapped plans for the northern leg of the HS2 rail line, freeing up £36bn which would have been spent on the Birmingham to Manchester section of that route.
And although there are still lingering doubts from some in the region about whether the plans will ever come to fruition, the benefits if they do are set to be huge.
Paul Simon, head of communications at Suffolk Chamber of Commerce, said: “Investing in our rail network is something of a no-brainer with estimates suggesting that for every £1 spent on construction, nearly £5 would be generated for the economy and wider society.
“If the scheme is fully realised, this would strategically serve to achieve two key goals: integrate the economy of the eastern region more fully into that of the country as a whole and act as a magnet for further inward investment from companies keen to be located within a region pivotal to both national and international business opportunities.”
There were also funding wins for the region’s science and innovation industries, following the news that the UK would re-join the EU's flagship scientific research scheme, Horizon.
The move means UK-based scientists and institutions will be able to apply for funding, with up to £85bn up for grabs.
The UK had been excluded from the scheme for the past three years because of a disagreement over the Northern Ireland Protocol, prompting widespread concern in the scientific community.
Roz Bird, CEO of Anglia Innovation Partnership, the management company behind Norwich Research Park, said: “Any support, especially financial, to help fund the breakthrough research that our colleagues undertake is very welcome.
“Of course, it does depend on how, where and when that funding is distributed but we think we have a very strong case in the areas of food biotech, agri biotech, health and non-traditional medtech that warrants this kind of funding and support.”
THE CHALLENGES
No year is without its challenges, and 2023 brought its fair share to the business community.
Rising operating costs lingered like a bad hangover from 2022, with many companies forced into survival mode.
As a result, business insolvencies jumped by 40pc in the first six months of the year – the highest level since monthly records began in January 2019.
And with consumers still feeling the pinch, the high street in particular struggled, as online deals continued to make it harder to encourage shoppers to visit brick-and-mortar stores.
Shopping centres in East Anglia said they were being forced to reinvent themselves to survive, with many - including Castle Quarter in Norwich and Buttermarket Centre in Ipswich - replacing empty shops with entertainment and dining offerings.
But many in the industry said high business rates were making this task harder, with Buttermarket Centre manager Rebecca Bird adding: “It’s not just what we’re paying, but also the pressure it puts on our tenants.
“Business rates account for about a third of their total costs being in the centre.”
There have also been big challenges for the region’s tourism sector, as bad weather sent domestic tourists packing over the crucial summer period.
Following a bumper year for visitor numbers in 2022, business owners said this year had been a wash-out in comparison.
Kayla Dunne, a director at Visit Norfolk, said these challenges would likely follow the industry into 2024.
She said: “Attractions, restaurants and pubs are hardest hit with days out and eating out being first to be cut back on by visitors when they are looking to make their budget stretch further.
“With staycations still popular, as they are more affordable than holidays abroad, our focus will be on ensuring north Norfolk is the destination of choice with our marketing campaigns targeting relevant audiences at key times throughout the year.”
THE SURPRISES
If there are two things that have been hard to predict this year it's interest rates and inflation.
The Bank of England shocked economists and investors by raising interest rates half a percentage point to 5pc - the highest level since 2008 - back in June.
Economists had expected the Monetary Policy Committee to raise interest rates by only a quarter percentage point, but instead it voted 7-2 for the surprise increase, arguing that it was aiming to bring higher-than-expected inflation under control and indicated concern about high wage increases and company profit margins.
A second, more welcome surprise came in October, when inflation fell unexpectedly to 4.6pc, down from 6.7pc the previous month.
And while the decline doesn’t mean prices are falling, it does at least mean they’re not going up quite as quickly as we’ve been used to.
James Shipp, partner at Lovewell Blake, said: “High inflation and high interest rates have both dampened consumer spending – although perhaps by not as much as first feared – and they have squeezed profitability massively.
“This has resulted in a lack of confidence, which more than anything is what is standing in the way of growth.
“ In actual fact, many businesses in our part of the world have healthy balance sheets, but many are reluctant to commit to investing when the economic prospects are so uncertain.”
But perhaps one of the biggest surprises of the year is that we’re finishing it with a housing market that, far from collapsing in a heap as predicted, is showing significant resilience, particularly when it comes to prices.
Nationwide Building Society recorded the third successive monthly rise in its house price index for November, while Halifax, showed a second rise in a row.
Both suggest that house prices hit rock bottom in August and September and, while it is early days, are showing tentative signs of recovery.
Mr Shipp added: “I would sum up the year as ‘not as bad as we feared’. That may be faint praise, but if you had offered such a view in January, I think most businesses would have taken it.”
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