When the economy is growing at a consistent rate, all industries stand to benefit. But inevitably, some are better positioned to capitalise on the country’s success than others. Growth leads to more investment and improves consumer confidence, which can lead to significant performance boosts in some sectors, while others’ successes seem modest in comparison. Which businesses benefit most from a growing economy though?
Financial & Business Services
Financial and business services are the largest service on offer in our services-based economy and, economically, an area where we thrive as a country. So it perhaps isn’t a surprise to learn that this sector, also our largest international export, would continue to thrive during a favourable economic climate.
Based most prominently in London, this industry benefits most from a strong economy, as more new startups request loans. Successful established businesses increase their borrowing as they grow as well and, while they’re at it, seek out advisory services to support these growth strategies, which can involve M&A, restructuring, and international expansion. Finance, law, and accountancy are all indispensable during such processes.
Furthermore, markets are naturally highly sensitive to economic conditions. So it’ll come as no surprise to hear that, while the economy is growing, they see a healthy boost as corporate earnings rise along with share prices. As a result, investor confidence solidifies, increasing trading activity and demand for wealth management services.
Construction
The construction industry is closely linked to economic cycles, leaving it vulnerable during recessions but poised for success during more prosperous economic climates. With growth comes increased demand for property, which naturally increases productivity in the sector as construction projects ramp up across the country.
As revenues rise and profits peak, businesses of all shapes and sizes lay out ambitious growth plans, setting their sights on new offices, factories, warehouses and other commercial spaces – particularly in built-up metropolitan areas, leading to building booms in cities and towns.
On top of that, lower rates of inflation, higher rates of employment, and rising incomes all increase demand for new housing, which, in turn, encourages residential property development, extensions, and renovations.
In recent years, we’ve also seen the state commit billions of pounds to infrastructure developments, focusing on roads, digital connectivity, and green energy initiatives. As a result, 543,000 – 600,000 workers will be needed per year, 60% of which are construction jobs – that can be general contractors, design-build firms, plant hire firms, and many, many more.
The Clean Energy Sector
The UK’s clean energy sector, also known as LCREE (low carbon and renewable energy economy), is one of the country’s fastest-growing industries, driven by considerable investment, ambitious government targets, and the goal of reaching net zero by 2050.
During periods of economic growth, wind, wave, and nuclear power (to name a few) see significant increases in investment, benefiting from the overall influx of capital into the economy. For example, between 2021 and 2022, revenue increased by circa 28%, from £54.2 billion to £69.4 billion – the most significant annual increase recorded since comparable records started in 2015.
Although LCREE has proven to be a crucial buffer against instability in fossil fuel markets, it has also been fragile during more challenging economic periods, most notably during periods of high inflation, when investment stalls and projects worth billions are cancelled.
We all want to live and work in a stable economic climate that creates momentum across all sectors. But, even under the best possible conditions, some industries are simply better placed than others to make the best possible gains.
Aside from financial services, construction, and LCREE, manufacturing and retail will also experience the strongest boosts. But still, this list of winners isn’t set in stone. The UK continues to evolve every year, as technologies advance and political policies shift priorities, new winners and losers will emerge in a country where consistent growth seems just out of reach.
Written by Damian Woods