4 key learnings from Livingbridge Investment Strategy Day

Livingbridge hosted its annual Investment Strategy Day in February featuring a vibrant array of speakers including Chief Economist at Investec, Phil Shaw; Expert International Strategist, Dr Gabrielle Walker; Former Chief HR Officer at O2, Ann Pickering; and CEO of Fanbytes, Timothy Armoo.

Through an eventful agenda, we’ve taken away four key learnings in the shifting landscape of the economy, labour market, climate change, and the evolution of consumer culture.

1. The importance of cost control in today’s economic climate

2. Humanising work culture to attract and retain talent

3. New opportunities are arising from climate change

4. Create a community feel to attract the Gen Z consumer

1. The importance of cost control

According to Investec’s data, in 2020, the UK economy shrank by 9.4%, the worst year since the Great Frost of 1706.

Whilst GDP is projected to grow at 4.5% this year, CPI inflation is at 30-year high, with annual inflation of +5.4% in December 2021.

Alongside this, price pressures are becoming broader, with utilities already taking centre stage. Ofgem announced a 54% rise in April’s energy price cap, and this is due to rise again by 25% in October. Food price pressure is also seeping through, with food inflation at 4.5% in December 2021.

This is all feeding through to wages, with National Insurance set to increase in April this year. Companies will also be facing an increase in corporation tax in April 2023.

One positive outcome, however, is a big increase in the UK household savings sector with excess savings of £159 billion throughout the pandemic, and this pool of excess savings will partly cushion the impact of rising costs.

Companies will need to manage costs – that is clear.

2. Humanising work culture to attract and retain talent

Since the pandemic, the UK has lost 410,000 workers due to long term sickness and people returning to the EU post Brexit. According to Microsoft’s Work Trend Index, 41% of people are likely to consider leaving their jobs in the next 12 months.

Interestingly, salary ranks as the 3rd most important contributing factor to the ‘great resignation’. Other factors include lack of work/life balance and a need for good company culture. Globally, 55% of the workforce feel they are overworked, and 1 in 5 people think their company doesn’t care about them.

Humanising work culture is the foundation stone during such challenging times and Ann Pickering has distilled this into “Head, Heart and Hands.”

Head – Make sure your company’s priorities, direction and aspirations are set out by senior management, with clearly defined roles and responsibilities.

Heart – Inspire, empower, engage and motivate your employees. Have the humility to ask your employees for input when you don’t know the answer, this can encourage them to feel included.

Hands – Create a trustworthy and supportive environment for your employees.

3. New opportunities arising from climate change

Around 80% of global GDP generators have set a net zero target by 2050, and the UK has a legal requirement to achieve emissions reduction by 78% by 2035.

To achieve this ambitious target, carbon emissions must decline by 45% from 2010 levels over the next decade. This requires a massive reallocation of capital, and the cost of capital is already changing depending on a company’s sustainability strategy.

Innovations in the green energy sector, such as decarbonised steel and the use of hydrogen are in development. Entirely new industries are being created to capture and remove carbon. The energy transitions commissions calculated that we need to remove 220 billion tons of CO2 from the atmosphere, and we are currently pulling out 80,000 tons a year.

Removing historical emissions is going to be the gold standard of what companies need to do going forward, and the traditional approach of carbon offset will not suffice.

4. The evolution of a powerful consumer – Gen Z

Gen Z is the most digitally advanced generation, and fast becoming the largest consumer group.

Growing up with technology at their fingertips, the role of social media is essential in engaging with the Gen Z market. The easiest way in is to humanise your brand, give it a personality and tap into an existing conversation on social media – making your brand more relatable.

As platforms like YouTube and Tiktok have transitioned into discovery channels, creating a hype and a sense of exclusivity using online sub-communities and conversational commerce is increasingly important.

Gen Z are very vocal about their beliefs, and often choose brands that are backed by social accountability. Brands can really connect and build customer loyalty, by being vocal on political and social issues. But the question is, how long will the loyalty last?

Once a year, Livingbridge hosts an investment strategy day, where we invite various industry experts to share upcoming trends, which will impact our portfolio companies. This is also where our investment strategies across departments are presented. To find out what our company has achieved in 2021, download our 2021 Highlights report now.