What lies in store for North West business in 2019?

After a hectic year of business activity, and political uncertainty, the region’s business community is taking a step back before returning in the New Year, ready to face the challenges, and opportunities, that 2019 represents.

Looking forward, several key players from the North West business sector have offered their views on how they see the coming year playing out, across various sectors.

Jerry Scriven, partner at MC Vanguard Corporate Finance, has consulted his crystal ball, and predicted: “When it comes to investment activity we will continue to see polarisation between sectors attractive to acquirers and investors and sectors deemed much less so.”

Inevitably, the thorny question of Brexit raises its head, and he said: “Investment is linked to risk and certain sectors are greatly affected by the risk exposure posed by the ongoing uncertainty around Brexit.

“On the flip side this is fuelling interest in sectors not exposed to this risk.

“For example, investment activity is on the rise in the healthcare market where businesses are developing a range of solutions to care for an ageing UK population.

“Facilities management businesses are also securing investment, particularly those like Fieldway Supplies that have secured long term contacts with recurring revenue streams.

“The recruitment sector has also seen the rapid growth of specialist labour providers due to the shortage of high quality labour and the drop in EU workers coming to the UK.”

Jerry Scriven

He added: “One micro trend we see continuing into 2019 is investment into smaller businesses with growth potential.

“Private equity (PE) houses are now seeing the potential of investing in smaller businesses they would have previously overlooked for bigger SMEs.

“In the current market there is a lot of money to invest, but a shortage of bigger businesses that fit the criteria.

“By expanding their search to include businesses with a turnover of less than £10m, PE houses have many more opportunities to invest.”

Another micro trend developing is advisory teams working with companies much earlier on in the process to help prepare the business for change, he said.

“These businesses tend to be growing SMEs which have a clear vision of where they want to take the business and see the value in engaging with advisory services upfront with a view to preparing the business for future investment, perhaps up to two years in advance.”

He added: “In light of the recent Budget announcement on changes to Entrepreneur’s Relief, taking a long-term planning approach has become more significant.”

Property professionals see further progress for Manchester in the year ahead.

Dominic Pozzoni, director, national offices at the Manchester office of real estate advisors Colliers International, said: “As a leading global city and with the second largest economy in Great Britain, Manchester is set to continue to grow and see ongoing investment in 2019.

“During 2018 the digital and tech sector has grown faster in Manchester than anywhere else in Europe.

Manchester is set to grow

“A number of major office occupiers, including Amazon, BUPA, Booking.com, Jaguar Land Rover, Royal London Group, Kellogg’s and The Hut Group, have seen the numerous benefits of locating and expanding within the region.

“This has been as a result of a combination of factors, including the extensive talent pool (100,000 students in four universities and a 72% student retention rate in Manchester), the ever-expanding Manchester International Airport and the communication links.

“I think that in 2019, we will see increasing number of businesses relocate divisions into the region, whom, in addition to the previous factors, will also be further attracted by their overall reduced outgoings.”

He said: “As I look out every day from our 12th floor office in the CBD and look across the city and beyond, the skyline is in a period of major transition on an unprecedented basis.

“Since I started my career in 1993, I have never seen so many cranes in the sky.

“During 2019, we will see a number of these developments completed, occupied and brought to life by new residents, businesses and hotel operators.

“Office take-up for 2018 will be a record year and we consider that 2019 will have similar momentum and prove to be a strong year, with an increasing number of businesses recognising the advantages of locating within Manchester.”

The appetite for Grade A office space will, as ever, be a focal point, he said.

“The largest speculatively-funded new build office development, Landmark (180,000sqft) on St Peter’s Square will be completed in Summer 2019, to accommodate the ever-increasing demand for Grade A office space.

“There has been strong demand for this space in 2018 and with continual strong occupational demand from both existing and inward businesses, this will continue well into 2019/20.”

He added: “Manchester was recently ranked 10th in the world as a destination for inward investment by IBM, putting us ahead of a number of some major global cities.

“Over the years, and on several occasions, Manchester has proven to be a resilient and forward-thinking city, full of talent, energy, creativity and ambition.

“This approach will continue into 2019, regardless of the Brexit outcome, and be for the better of the city and wider region.”

Will Henson, head of commercial property at law firm Slater Heelis, believes the tech sector will help to fill the vacuum created by the fall out in the high street sector.

He said with industrial space remaining buoyant and developments in technology driving demand in the office sector, it’s not all doom and gloom.

“The next 12 months will see ongoing corrections in the retail property sector and the loss of some major retailers and falling rents will, sadly, continue throughout 2019.

“This will most likely hit shopping centres the hardest with some analysts suggesting they could shed 20% of their value by the end of next year. Footfall in shopping centres fell even quicker than high street footfall during 2018,” he said.

“With some retail rents due to drop by up to 40%, this will impact the investment market and add to the increasingly worried wealth managers who are beginning to drop property from model portfolios.”

But he added: “With every cloud, however, there is a silver lining.

Will Henson

“Large shed warehousing is suiting the move towards bigger and more consolidated internet retailing and this may prove a wise investment as online retails expand their logistics services.

“Despite the ongoing turmoil of Brexit, the fall in the pound has increased demand for British exports and the industrial sector is holding its own, with rents still increasing by about four per cent over the year, which I feel is set to continue.

“Brexit, of course, also impacts the offices sector and many businesses have been delaying decisions on taking up new or larger office space.

“However, I believe the biggest impact in this sector over the next 12 months will be a surge in the demand – and therefore supply – of non-traditional space such as that delivered by WeWork.

“There will continue to be a move towards more ‘alternative’ ways of working, which will see more people sharing work time between the office and home, more job sharing and more ‘hot-desking’ type accommodation.

“We are really just at the beginning of this transformation and as traditional landlords reinvent their offering and many new property companies enter the market it will be the genuine tech-enabled offices of the 21st century, ones which support and enable truly joined-up work and lifestyle factors that will drive this sector forward.”

Will said: “I wouldn’t be surprised if the regional office market supply throughout 2018 is a record high with Manchester on track to break 1.5m sq ft for the first time ever, which shows the continuing confidence in the sector.

“Ultimately, however, the whole commercial property sector is still waiting with baited breath for the final terms of Brexit, at which time we will gain a much clearer picture of what lies ahead.”

Jonathan Boyers, head of mergers and acquisitions (M&A) at KPMG, believes the impressive pace set during 2018 is likely to abate during the coming yeasr.

He said: “While the M&A market has remained blisteringly hot over 2018, the most recent data from the ONS (Office for National Statistics) seemed to indicate that deal volumes are starting to decline – perhaps a sign that boards are becoming more cautious as economic and political uncertainty continues to intensify.

Jonathan Boyers

“We’re also starting to see banks, who have previously been bullish in offering generous debt packages to support transactions, start to tighten their stance and terms on offer in recent months.

“However, despite volumes falling, prices remain high – in some cases, astronomically so – and in my view, will remain so into 2019 as latent corporate and private equity money compete for high quality businesses which, themselves, are in finite supply.

“The fact remains that there will always be a pressing need for businesses to transform far more radically and quickly than is possible via organic means, which is why M&A will always remain on the boardroom agenda, even in times of uncertainty.

“But those corporates that do want to make strategic buys are finding themselves having to pay higher multiples for the privilege.”

He added: “Notwithstanding whatever happens post-March 2019, perhaps we can, therefore, expect fewer – but perhaps bigger – deals in the few months ahead.”