You didn’t read it here first, but 2016 was a tumultuous year. The chaos – good and bad – unleashed by the EU referendum and the US presidential election left many speculators scratching their heads, and many more weeping into their handkerchiefs.
Peer into the next 12 months and things don’t look much clearer. The ramifications of decisions taken this year will begin to crystalise next and other variables such as oil prices, the global economy and international relations between major world powers – to name a few – make predicting the future a mug’s game.
But there are reasons for investors to be cheerful. From chaos comes opportunity and the natural ebb and flow of economies makes betting on outcomes a potentially more lucrative venture for those who guess right.
OUR GUIDE TO INVESTING IN STARTUPS
Download your copy today
More to the point, while many expect the fallout from 2016 to have a negative impact on 2017, others are not so sure. Again, whether you are a bull or a dove might depend on your stance on Brexit and Trump, but a neutral analysis also throws up reasons to be cheerful.
1. Building is back on the agenda
In his Autumn Statement in November, Chancellor Philip Hammond announced a bundle of money to support housing projects. Specifically, this was a £2.3bn housing infrastructure fund and £1.4bn to construct affordable homes. House builders were hit hard in the Brexit aftermath, but this could go some way to brightening the picture. At any rate it’s a signal of intent by the government and it should lead to investment opportunities relating to construction.
2. Corporation tax cuts
Next year sees the beginning of the government’s planned corporation tax cuts. The CT rate will drop from 20% to 19% in April, meaning companies will have a bit more money to pay dividends and plough back into expansion plans.
CT receipts in the tax year 2015–16 totalled £44.4bn. A bit of cod maths suggests there could be more than £2bn extra money sloshing around in the economy next year. A fair wedge.
3. Startups are confident whatever the weather
Hot UK startup sectors show little sign of cooling and good ideas will attract investment regardless of prevailing economic winds. Of course, some sectors perform better in times of economic uncertainty, but areas like micro-brewing, healthtech and mobile gaming are growing like mad.
Other areas to consider include businesses in the sharing economy, i.e. those that facilitate the exchange of goods and services such as cars, holiday homes and even jobs.
4. Technology is about to explode
Technological innovation has been speeding up for decades, but 2016 was something of a turning point. Automation, for example, is creating hugely profitable companies with few overheads, while developments in artificial intelligence and the Internet of Things continue to unfurl. It means the chances of bagging a stellar performer continue to rise.
5. Trump is a business man
Contentious one, but the president-elect has talked almost exclusively in business terms since his recent victory in the US election. His promise to create jobs in America and his seeming appreciation for the UK are a silver lining to his alarming views beyond the economy.
6. Exporters are loving the decline of sterling
Okay, so many exporters also buy raw materials from overseas, but the declining value of the pound is making British goods vastly more attractive to buyers beyond its shores. Businesses selling services in foreign markets, from professional services to world-renowned educational institutions will do well.
7. So is the UK tourism industry
Again, thanks to the weak pound the UK has become a more desirable travel destination. Already loved by holidaymakers from the US to China, the promise of a 10–20% reduction on spend will be an enticing prospect next year.
Tourism has a ripple effect on all kinds of businesses from taxi firms to retailers, so the economy generally should see a bump and individual companies will look to take advantage of an influx of big-spending tourists.
8. Investment in productivity is happening
In November, Mr Hammond promised to tackle the UK’s productivity problem. He announced a £23bn productivity investment fund, which he will dole out over the next five years. Details remain thin on the ground, but watch carefully for sectors set to benefit from the new cash.
9. Broadband is due an upgrade
Another pledge from the Autumn Statement is to ramp up the UK’s broadband capacity. There is 100% business rate relief on new fibre infrastructure and £1bn for broadband. Mr Hammond is targeting business with this measure in another bid to speed up business processes.
10. The economy might be okay
A few economy-watchers say official estimates of UK growth next year are unnecessarily gloomy. The UK is expected to grow considerably faster in 2016 than predictions made in the Spring, with the latest figures suggesting it will rise 2.1% this year, despite the Brexit tumult happening in June and all the uncertainty beforehand.
The government’s official prediction of 1.4% growth in 2017 is considerably lower than the 2.2% it claimed before the referendum. Watch this space.