Our first look at the impact of COVID-19 on mid-market industries in mid-2020 found a very uneven trail of destruction from the economic slowdown and disruption. COVID-19 had been kind to some industries and cruel to others. Six months on, and our unique index into mid-market health reveals that this unevenness has continued even as the global outlook begins to improve. In this article we touch on some significant industry changes and provide links to other content which explores dynamics further.
After plunging to record lows in H1 2020, results from our latest Global business pulse drawing on research between October and December 2020 show a modest overall recovery of 5.8 points to -3.6 globally. Looking across the 13 monitored industries, there is some level of recovery in 11 of these, but the results differ widely.
Point change: H2 vs H1 2020
H2 2020 index score
Electricity, gas and water supply/utilities
Consumer products (Food and beverage, retail, logistics, automotive)
Technology, media and telecoms
Other business services
Agriculture, hunting, forestry and fishing
Construction and real estate
Education and social services, personal services
Travel, tourism and leisure
The industry that staged the strongest recovery was electricity, gas and water supply/utilities, which leapt up 12.7pts to regain it’s top spot in the index rankings. This area benefited from some underlying strength in commodity prices but more fundamentally from the essential nature of demand. Missing out entirely on the rebound was travel, tourism and leisure (TTL), which fell a further 0.3pts to -12.3, placing it last in the industry rankings.
TTL is still experiencing falling revenue expectations and rising barriers to growth, as it battles uncertainty, ever-changing restrictions and lingering fears due to COVID-19. We recently explored the specific challenges faced by one component of this industry, the hotel segment, but many of these challenges are common to all. One glimmer of hope can perhaps be found in the fact that investment intentions have recently improved for R&D. This most certainly points to innovation but could also suggest reinvention of business models.
Consumer products rebounds strongly
An industry that also benefited from essential spend topped up by some of the money that would normally have been spent on TTL was consumer products, which was up 8.4pts during the period. Within this broad ranging industry, retail was a real bright spot, with retailers recording an average change in revenue in 2020 of 7.2%, compared with -4.5% for food and beverage (F&B). Both retail and F&B were hit by the pandemic and while F&B companies have tried to innovate, it has been retailers who have had most success shifting online, especially those which already had omnichannel strategies. Overall, retailers expect the positive picture to continue into 2021, with nearly 55% expecting to increase revenue during the period, outstripping global averages of around 45%.
The shift towards digital transformation provides a boost for some
A service industry that produced robust results in the last six months was financial services. Its index score rose 5.5pts to -3.4. Higher growth expectations for the next 12 months helped propel this move, and notably stronger profit expectations. Low interest rates and increased credit risk have impacted the profitability of banks in 2020, and deal activity has fallen dramatically for asset managers.
This is an industry that is not only navigating COVID-19 disruption but real structural change, and our industry experts have identified five key trends which financial services companies will need to watch in 2021. These include a strong shift towards digital transformation, a major skills shortage and a growing tendency towards business partnerships, collaboration and innovation.
In recent commentary, we highlighted the fact that changes in the way we work have provided a boost to technology companies, and this is one of the drivers behind the strong showing of technology, media and telecoms, which increased its index score by 6.2pts and maintained its H1 ranking. So too did a sharp rebound in mid-market TMT firms reporting an optimistic outlook for the economy over the next 12 months.
TMT companies are always trying to keep on the right side of change, and we’ll be exploring the top 10 business questions that tech firms need to be answered in 2021, with our industry experts around the world.
Manufacturing prioritises traditional investment areas
Manufacturing still remains in the bottom half of the rankings by health, but it did make good progress in H2. The improvements were driven by a bounce in economic optimism – with 59% of manufacturers now optimistic about their economies in the next 12 months – and supported by real strength in growth and investment expectations.
Looking more closely at the investment categories, the biggest increases in investment intentions were in the traditional areas of ‘new building’ and ‘plant and machinery'. This dynamic is seen in a number of industries, and here speaks to the need for warehousing to hold more raw materials and finished goods as a buffer against future disruption. Stockpiling of raw materials has been particularly important when supply chains are far-flung and unpredictable and imports are heavily regulated.
Read more insghts
Please take a look at our Business health section if you’d like further details about the index and the most recent findings. Or visit Retuning your business to read more about steps business can take to move from crisis management to restoring and rebuilding.