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At a glance

  • Constant innovation in technology and the high-speed development of artificial intelligence (AI) is reshaping entire markets at a relentless pace. 
  • There could be opportunities to ramp up competitiveness, innovation and engagement for organisations that are prepared to embrace new habits.
  • There is pressure to invest to stay ahead in the race to net zero, with reputational gains for those seen as leaders in the green transition.
  • Any decisions must be balanced against the cost of investing in change at a time of restricted budgets, low growth, and global tensions. 

 

For organisations operating in or around the public sector, innovation at break-neck speed is creating exciting opportunities to deliver new capabilities and efficiencies. But an increasingly complex and fluid economic and political environment – against a backdrop of relentless cost efficiency – is making it difficult for leaders to strike the right balance seizing new opportunities and managing external pressures.

“In today's volatile, uncertain, complex and ambiguous environment, it's essential for management teams to possess a guiding North Star, setting a definitive vision for the future. Equally critical is the agility to swiftly adapt to emerging trends and shifts, ensuring the organisation can navigate towards its ambitions with precision and flexibility. Having the right management team is essential to both,” says Barrie Davison, our National Sector Head for Healthcare, Education, Local Authorities and Charities.

Tapping into the forces reshaping society and business could help public sector organisations get future fit. Here are the six megatrends we’ve identified as key to operations and growth in 2024.

Digitalisation, Artificial Intelligence, and Augmented Reality will reshape sectors

The pandemic sharply highlighted the importance of technology in the medical industry and its vital role around the world. The public sector is becoming more integrated with technology, notes Barrie. Some agriculture businesses are becoming more like tech businesses than traditional farming businesses. And education settings are integrating AI into the curriculum and embracing its use within the teaching environment. 

The speed of innovation and the rapid acceleration and adoption of new technologies such as virtual and augmented reality (VR and AR) as well as AI, can leave leadership teams bewildered. But organisations have little choice but to get up to speed or be left behind.  

Research by the Alan Turing Institute has found that use of generative AI, for example, is already widespread in the public sector, while many more advantages and opportunities are yet to be exploited. Primary among these is the opportunity to use AI to reduce the bureaucratic burden of public sector work and therefore increase efficiency. 

According to the Institute for Government, AI is also being deployed in healthcare to speed up development of new drugs and vaccines and in education to offer more personalised learning at scale. 

Skills for the future will be fundamental for driving peak performance

These changes are likely to impact the skills we need in the workforce of tomorrow. Attracting and retaining talent is another crucial element to respond to and prepare for. “From healthcare providers to universities, how are you flexing your organisation to attract and reward talent? If you’re recruiting from overseas, are you creating an infrastructure and culture where your people feel at home? Investing in your people and networks is important,” Barrie says.

We may also need to forget the idea of training being the preserve of the young. While AI may allow computers to pick up tasks, in the medium term there could be a shortage of critical skills across sectors, not least in the management and interpretation of data and areas such as cybersecurity. It will mean organisations having to put effort and budget to training and re-skilling, which could fit well with government plans for the introduction of lifelong learning allowances from 2025.

(De)Urbanisation?

According to data from Unctad, more of the world than ever is living in an urban setting, with 57% globally living in a city in 2022. A UK government Trends Deck from June 2021 on urbanisation predicted the current consolidation of large urban areas would continue, with some negative impacts on public health (increased pollution from concentrated energy use) and a potential strain on public services in these locations. 

Unsustainable property prices and the emptying out of smaller towns bring further challenges for policymakers. The ability for more of us to work remotely has helped to counter some of these pressures and organisations need to consider how they use remote and flexible working to play a part in rebalancing the population living in towns, cities, and rural communities. 

Judicious use of such policies can enhance an employer brand, while greater digitalisation of public services could allow more employees in the sector to be less location dependent. 

Sustainability will increasingly drive perception of public sector organisations

Pollution and high energy use may be driven up by urbanisation, but organisations working in and with the public sector will increasingly be expected to share how they plan to manage their own path to net zero. Younger talent will increasingly demand action. There are lots of studies and research papers to show the ability to lead on Net Zero and other ESG issues is a major plus when it comes to attracting young talent. 

Government procurement rules may also begin to stipulate green targets from the companies and organisations in its supply chain. And while the economics of energy increasingly converge with such policies, greater use of renewable will not only become more secure and reliable but will also be more cost effective and efficient. 

As a member of the 3Ci – Cities Climate Investment Commission, Barrie has been helping decipher how decarbonisation could be driven at scale through both public and private funding to deliver on the UK’s long-term objectives. “What are you doing to future-proof your business,” he says. “Is decarbonisation on the agenda? What strategies do you have in place to track and reduce your carbon footprint? Have you considered retrofitting your building? Are you building a sustainable framework?”

Changing global dynamics will push the global to become more local

Not relying on foreign powers for energy supply already looks like the smart move, as a sudden increase in geopolitical risks, with war in Ukraine and the Middle East already having an impact on global energy flows and supply chain costs, with the threat looming of tensions between China and Taiwan also escalating. 

The potential for a second Trump presidency brings with it a further threat to the existing global order, for better or worse, with his focus on protectionist and isolationist trade policies and away from multinational or global alliances.

Consider developing risk modelling and risk management capabilities and build greater resilience into your operations. As we continue to live in an age of uncertainty, leaders need the ability to adapt to frequent political, macroeconomic, public health and social shocks.

Check out our social channels for more business insight on the trends and issues shaping our future.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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