Winners
Companies with agile business models – We live in an age where established business models can quickly be assailed by a variety of factors from technological advancements, rapid change in consumer tastes or unpredicted events like Brexit. In view of this unpredictability, the companies that will thrive will be those with balanced, competent boards with an alert eye on their changing operating environment but critically, with an agile business model that allows them to react defensively and if possible, take advantage of any opportunities that may present themselves.
Turnaround funds – The operating environment for businesses will continue to be difficult on a macro and micro basis across many industries. This will present opportunities for Turnaround practitioners though the probability of success will be very much sector-dependent to a large extent.
Debt funds – The trend of traditional UK banks retrenching towards more conservative lending strategies in light of looming macro-economic shocks such as Brexit etc., will continue to present opportunities for the debt funds who are increasingly playing a vital role in providing liquidity to businesses (albeit mainly for listed and large private companies at present).
Losers
Automotive sector – Original equipment manufacturers and their supply chains will continue to face significant challenges in 2020 mainly due to the overall slowdown in consumer demand and exports not just in the UK, but in many other manufacturing countries. In particular, the increasing compliance pressure from the EU authorities associated to new emission tests will continue to cause production bottlenecks (with associated funding impacts), especially for producers with high diesel vehicle order books.
Construction – The seemingly unending uncertainty caused by Brexit will continue to weigh heavily on the construction sector which has already been under stress in the UK for the last couple of years. Retail and commercial office construction has been declining throughout 2019 and will take some time to recover. It is to be seen whether the infrastructure investment blitz seemingly being promised by the main political parties (should they win the upcoming election) will materialise in time to help the construction sector avoid another difficult year.
Care homes – The care home sector remains a stubborn fixture on any recent list of struggling sectors in the UK and I predict this to remain the case in 2020. The often recited challenges (rising staff costs, permanent staff recruitment, falling local authority fees etc.) to the sector remain unchanged, and if anything, might worsen through the continued rise in minimum wage and the impact of Brexit on the ability to recruit permanent staff.
