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Markets

A tough road ahead for global industries in 2021: EIU

  • This year more uncertainties and risks lie ahead as the world stutters into recovery, said EIU.
Updated 21 Oct 2020

Bearing the brunt of the disastrous 2020, marred by the COVID-19 pandemic, the upcoming 2021 would be a rough path to tread for the global industries, said the Economic Intelligence Unit (EIU) in its latest report titled Industries In 2021: A Slow, Painful Recovery.

Giving its outlook for six global industries: automotive, consumer goods and retail, energy, financial services, healthcare and pharmaceuticals, and telecommunications. The EIU stated that much of what it predicted in last year’s report turned out to be wrong as the coronavirus pandemic overturned assumptions about the development of the global economy.

This year more uncertainties and risks lie ahead as the world stutters into a recovery. One imminent risk is the US presidential election on November 3rd, which may result in policy changes if the Democratic Party candidate, Joe Biden, wins—and yet more uncertainty is likely in the event of a disputed result said the report.

Yet, underlying this political and economic volatility are trends that have remained consistent, or have even been amplified by the pandemic.

Job losses and bankruptcies will mount

With their finances already weakened by the pandemic and resulting lockdowns, many companies will not be able to take advantage of a recovery that is likely to be fitful. The consumer goods and retail sector in particular is likely to see a wave of bankruptcies and store closures as more business goes online.

The report said that the financial sector will also have to cope with a sharp rise in non-performing loans that, in some cases, may overwhelm the provisions that banks have put in place.

the report was of the view that restructuring will reshape even those industries, such as telecoms, which have emerged from the pandemic relatively unscathed. However, there will be some winners from this process as markets consolidate around surviving companies and opportunities open up for new business models.

Some governments will aim to support a green recovery

With many industries lobbying for support, governments whose tax revenues are already depleted will have to focus support and incentives on sectors with the strongest growth prospects, or those that feed into long-term policy goals, the report said.

In the energy sector, the policy will focus on increasing the use of renewable energy. Asia will see particularly strong growth in renewable. In the automotive sector, generous incentives will continue to encourage purchases of electric vehicles, particularly in Europe, although countries such as France will start to trim back funding as the sector develops. China, meanwhile, will shift its focus towards hydrogen fuel cell vehicles, previously an area where Japan led the way.

Trade spats and international disputes will remain disruptive

As countries and companies try to rebuild, their focus is likely to turn inwards, with domestic markets and operations becoming a priority. However, the report pointed out that as pressure to reshore production and secure supply chains increases, this will have implications at an international level, too.

The US-China conflict, which overshadowed the pre-pandemic world, will continue regardless of the outcome of November’s presidential election in the US. The technology war will also affect other sectors, including automotive and consumer electronics, while in the financial services sector concerns over

The report said that China’s intentions could undermine Hong Kong’s role as an international hub. The UK, meanwhile, will face its own international challenges, as Brexit finally takes full effect on January 1st.

Digitalisation will offer the biggest opportunities

Digitalization will affect nearly every industry sector. In the consumer goods and retail sector (and even the automotive sector) the growth of online shopping will generate new companies and new jobs, making up for some of the cuts seen in real-world retailing.

The report said that the rise in online shopping and other activity will also fuel the growth of new financial services, starting with digital payments and progressing into digital currencies, including national ones in China and elsewhere. Even healthcare providers, spurred by the pandemic and social distancing measures, are expanding their online services, with new regulations widening access to telehealth—while at the same time reining back its use where it could affect patient care.

The implications for growth

The report pointed out that the companies will be focused on the search for sales growth to aid their recovery. The report expects all six industries to report demand growth at a global level, but it will be unevenly spread.

In some industries—particularly the automotive, retail, and energy sectors—it will not be enough to make up for 2020’s slump in any but the fastest-growing markets, one of which will be China. In those sectors that were hit less hard in 2020, such as telecoms and healthcare, the recovery in 2021 will be more complete.

However, companies will still need to navigate considerable changes in business models, economic conditions, and consumer needs.