Expecting the unexpected: ten predictions for the year ahead    

Each January, I use our first column back after the festive break to make some predictions for the year ahead in our consumer-facing sectors.   

While I’d say that at least eight out of ten of my predictions for 2022 were correct, I certainly didn’t foresee some of the more extraordinary events of last year – not least a war on our doorstep in Europe, a resultant energy crisis, three UK PMs, and the precipitous decline in value of the pound!  

Expecting the unexpected now seems like the norm – so (with some trepidation) here are my top ten predictions for our consumer-facing sectors for 2023.   

  1. Consumer spending patterns will change  

We have become used to consumer spending power growing year on year. For many decades, we have seen a consistent increase in the variety of goods available, and the frequency with which consumers (aided by cheap credit) make purchases.  

Today, all things considered, consumer confidence remains high – but going forward there will simply be less disposable income available to be spent in our sectors. Food price inflation (which reached more than 10% during the second half of 2022) and energy price increases have already had an impact, and non-food inflationary costs, like mortgages and rental costs, will be felt more extremely in the coming months.  

A whole swathe of consumers will be faced with difficult choices about how they spend. The question is where will consumers cut back? Pre-pandemic, the then-Executive Chairman of JD Sports boasted that many of the retailer’s customers buy “nine or ten pairs of trainers a year.” How many will these shoe fanatics be able to afford now? Will cuts come from small-ticket items – apparel purchases, subscription services, takeaways, daily cups of coffee, visits to the pub – or will consumers put off big-ticket purchases, like holidays, cars and house renovations?  

2023 will see clear winners and losers from changes in consumer spending. Businesses that are closest to the customer – and have a deep understanding of their changing priorities and spending abilities – will be able to create the most robust responses to this ongoing economic uncertainty.  

2. We’ll see the resurgence of UK manufacturing 

Supply chain disruption has become the new norm. Once dependable trade routes from Asia, with stable freight costs, have now become predictably unpredictable and volatile. Against this backdrop, many consumer businesses are considering bringing their manufacturing operations back home, or at least ‘nearshoring’ in Europe.   

While inflation, increasing material costs, and an ongoing labour shortage present significant challenges, UK manufacturing brings comes with far fewer risks and speaks to the growing demand from consumers for greater supply chain transparency and local production.  

Indeed, according to trade group Make UK, three-quarters of UK companies have increased the number of their British suppliers in the past two years, and almost half plan to further boost their UK supply base. At the same time, more than ten percent said they planned to reduce reliance on Asian suppliers.   

Whilst some businesses in our sector have deep connections to manufacturing – for instance, Howdens, DFS and Card Factory have their own plants – others will need to rebuild skills and infrastructure that haven’t been needed in the UK for years. Possibly, we’ll see parts of the UK rediscover their rich manufacturing heritage.   

A sofa manufacturer
DFS produces 100% of its DFS-branded sofas in its own factories in Derby and Doncaster.

3. Unionisation will continue  

Most HR Directors in the consumer sector have spent their entire careers with minimal exposure to trade unions. In many businesses, they have been confined to one area of the organisation like warehousing or logistics. And usually, union relationships have been warm and mutually respectful.  

But the winds have started to change. After two years that redefined people’s relationship with their work – and very real cost-of-living pressure on employees – large groups of employees have started to come together to demand better pay and conditions, and in the last few months, the UK has experienced the largest wave of strike action in thirty years (albeit more focused on the public sector currently).  

Today, around a quarter of employees are part of a union, compared with more than half in 1979. While I don’t see us returning to pre-millennium levels (in 1980, around 70% of workers’ wages were set by collective bargaining), I have no doubt that union membership will increase in the year ahead, as employees across all sectors seek improvements on wages, benefits and working conditions.   

The consumer industries won’t be immune to this. We have already seen new unions form, like the App Drivers and Couriers Union, and businesses which had previously been able to keep unions “out” faced with their first strikes. Amazon, for example, will see its first wave of industrial action this month, with workers belonging to the GMB trade union set to walk out of their Coventry warehouse over pay.  

Increased unionisation will add another layer of challenge to the labour market, and how businesses listen to the needs and demands of their employees will define them in years to come. In our consumer industries, allowing an “us and them” mentality to set in would be nothing short of disastrous.    

It is encouraging to see businesses like Sainsbury’s already leading the way here: earlier this week they announced, with the support of their Unions, that frontline hourly paid colleagues’ pay would increase by 10% this year.  

4. A business’ moral compass will become increasingly important 

Having an active ESG agenda is one thing. But last year, Patagonia founder Yvon Chouinard took his commitment to the environment one step further when he and his family transferred all ownership of the company to environmental trusts. Every dollar of profit that’s not reinvested will now be used to fight the climate crisis, by funding grassroots organisations, backing businesses, and supporting political candidates.   

Of course, not every business can – or should – follow this example. But Patagonia’s model is indicative of a growing demand for more purpose-driven and responsible capitalism.   

Consumers, especially younger generations, will expect brands to have a clear moral compass, and for their values to be reflected in the business’ operations. We can therefore expect more organisations to strive for B Corp status, to see greater transparency in supply chain operations, and for businesses to double down on their diversity and sustainability efforts.   

Moreover, leaders will be expected to speak out on the issues that matter. If Covid-19, Black Lives Matter, and the war in Ukraine have taught us anything, it’s that being a bystander is no longer an acceptable response to injustice. 

“Being a bystander is no longer an acceptable response to injustice.”

5. More companies will be taken private  

Once darlings of the stock market, consumer share prices continue to remain depressed. Our discussions with many large-cap Private Equity funds suggest that they now consider many consumer businesses to have market capitalisations significantly beneath their actual value – particularly if consumer confidence remains as robust as expected.  

Over the coming year, we can expect many listed consumer businesses to be “taken private” as PE funds seek to increase their exposure to diverse, and undervalued, consumer sectors – from veterinary services to digital retail, to fast fashion, to furniture.   

For some businesses, particularly those that are actually underperforming, PE ownership could be a welcome blessing, and present an opportunity for these businesses to transform out of the glare of the public markets. However, for other consumer businesses – which are fundamentally performing well – it is unclear what the benefits of PE ownership would be. Given share prices today, shareholders who were loyal to consumer businesses throughout the pandemic won’t benefit from the upside.  

 6. Businesses will fail 

One of the surprising, perhaps unintended, outcomes of the pandemic was that thanks to government support and cheap credit, surprisingly few businesses failed in 2020 and 2021. Late 2022, however, saw many beloved retail and fashion brands go into administration: Joules, Misguided, McColls, made.com and Carzam, to name just a few.  

2023 will sadly see this distress extend to other consumer sectors – in particular, digital scale-ups, hospitality businesses and also some consumer goods companies. For some businesses, this will be a sad and inevitable outcome of their inability to pass increased costs to customers. For others, it will be as a result of debt – possibly incurred during the pandemic – that becomes unmanageable to service. And for a small number of businesses, particularly in the hospitality sector, administration will be the end result of an inability to maintain relevance with a customer and the end of inevitable slow declines.  

2023 will also be challenging for some businesses that were founded or gained success during the pandemic. In some ways, Covid-19 created conditions for artificial success: a short-lived shift in consumer behaviour, sudden changes to people’s disposable income, and never-before-seen levels of government financial support. For example, in the rapid delivery market, a quintessential pandemic success story, the bubble is already beginning to burst: Gorillas, Weezy, Cajoo, Buyk and Fridge No More were all forced to sell or shut down in 2022.  

In December, Gorillas was bought by Turkish competitor Getir. Photo credit: Gorillas.

7. We’ll see more “cost out”  

With a new set of financial challenges ahead, businesses will again rethink their cost structures in 2023. In many cases, this could mean restructuring, and the disappearance of entire layers of organisations in our sector.    

In tech, this process is already underway. According to data from Axios, more than 120,000 people were dismissed from tech jobs in 2022 – many from giants Meta, Amazon and Netflix. Google has kickstarted a programme to streamline operations, reducing funding for or cancelling entirely certain projects. And just this week, Amazon announced plans to axe 18,000 jobs, the largest round of cuts in the company’s history.   

We’ve also seen cost-cutting efforts in grocery. In October, Tesco announced its aim to make £500m in savings, in part by cutting more than 300 head office jobs. Similarly, Sainsbury’s’ efforts to become a more “simple, nimble and efficient” business include plans to remove 300 jobs in its support centre.  These will be the first of many as businesses seek to – once again – examine each and every aspect of their organisation to remove costs.  

Amazon has announced its largest-ever round of job cuts.

8. Older workers will return to the workforce 

One in four furloughed people in the UK was over 55 – and a significant portion of these older workers didn’t return to the workplace.  

This year, driven by financial pressures, swathes of this demographic could return to the workforce, encouraged by businesses offering flexibility and forward-thinking policies like grandparents leave. This represents an exciting opportunity for businesses and a partial solution to the labour crunch. Once they return, older people are much less likely to move jobs than younger workers, making them more valuable from a retention standpoint.  

9. The drive to digital will continue – but in a different way  

Digital transformation will not slow in 2023, but this year may herald a new – more considered – approach to innovation. In the last twenty years, encouraged and funded by VCs, success in consumer tech has often been measured solely by how quickly companies can gain market share, with notions of profitability or sustainability (in both senses) often taking a back seat.  

“Innovation will still be a top priority, but there will be a greater emphasis on profitability, and how quickly that innovation will deliver a return on capital.”

We are already seeing a shift away from this mindset. In a turbulent economy and geopolitical landscape, establishing a clear, profitable, and sustainable business model will take priority – both for new tech businesses and organisations looking to transform their digital offering. Innovation will still be a top priority, but there will be a greater emphasis on profitability, and how quickly that innovation will deliver a return on capital.   

10. The talent landscape will shift   

It seems as though we haven’t had a moment of respite since March 2020. Many of today’s leaders have guided their businesses through Brexit, Covid, political instability, a major post-pandemic labour crunch, and serious supply chain disruption presented by the war in Ukraine. Burnout is no longer the exception, but now in many cases the rule. In 2023, my sense is some of our sector’s most visible leaders will choose to step away to take on new, perhaps less intense, challenges. This presents an opportunity for a new generation of leaders – for example, David McDowall who has recently been appointed as CEO of the UK’s largest pub company, Stonegate – to step up and lead our sectors forward. 


Despite the challenges that the next period will bring, I am hugely optimistic about 2023. When it comes to consumer sector spending, there are strong green shoots of positivity: warmer weather means energy costs are coming down; salaries are forecast to increase, bringing more disposable income, and the strong Christmas trading results indicate that consumer confidence remains high.   

It’s also worth recognising how far we’ve come. This time a year ago, our lives were still heavily disrupted by Covid-19 – with the possibility of more waves of Covid restrictions on the horizon. It is a testament to how quickly things can change that Omicron now feels like another lifetime ago!  

Most of all, I’m optimistic about the resilience, creativity and agility of leaders in our sector – and the willingness of consumers to keep spending. If the past three years have taught us anything, it’s that exciting things can happen in the face of disruption, and I’m looking forward to seeing what’s next for consumer-facing businesses in 2023! Wishing you all a very happy and healthy year ahead.  

Elliott.goldstein@thembsgroup.co.uk | @TheMBSGroup