The world in 2023 Show articles

Subscribe Sign In

HOME WORLD US COMPANIES TECH MARKETS CLIMATE OPINION WORK & CAREERS LIFE & ARTS HTSI

The world in 2023 Show articles

Companies Add to myFT

Business trends, risks and

people to watch in 2023
What to look for this year in the corporate world in sectors from energy to
private capital and technology

For the third year in a row, Elon Musk is the FT’s pick as the techie to watch in 2023 © FT montage; Getty/AFP/Dreamstime

FT Reporters JANUARY 2 2023 89

Receive free Companies updates

We’ll send you a myFT Daily Digest email rounding up the latest Companies news every morning.

Enter your email address Sign up

This time last year, companies were wondering if there was an end in sight to
the Covid-19 pandemic. Then in February, Russia launched a full-scale
invasion of Ukraine, creating major ructions in markets from oil and gas to
food and unsettling investors around the world.

Some industries have been particularly affected by the economic reordering:

this is what to look for in the coming year in the corporate world in sectors
from energy to private capital and technology.

Energy
Trend to watch
2023 could represent a new era in energy: the beginning of a partitioned global
oil market. For the past three decades, energy, particularly oil, has generally
flowed freely around the world to the highest bidder. European and US
sanctions on Russian exports have turned that market on its head, in effect
dividing the world once again between east and west.

Russian energy exports that used to flow to Europe will now head towards
India and China. US exports will flow to Europe and shipments from the
Middle East may plug gaps in both directions. How this new system performs,
whether the sanctions regimes work and who steps in to trade Russian energy
will drive prices in the next 12 months and potentially for years to come.

Russian energy exports that used to flow to Europe will now head towards India and China © Dhiraj Singh/Bloomberg

Biggest risk
Authorities in the US and Europe are gradually moving towards increased
regulation of climate targets and emissions reporting. The US Securities and
Exchange Commission in March proposed measures that would make
companies disclose data about carbon emissions in their annual reports. Under
the recently passed Inflation Reduction Act, “excess” methane emissions in the
US will be penalised from 2024. In Europe, Shell’s appeal against a landmark
ruling on its emissions reduction targets is ongoing.

This year is likely to see more litigation and more pressure for increased
regulation, with direct consequences for how energy companies plan, operate
and report.

Person to watch
Wael Sawan takes the helm at Shell, Europe’s biggest energy company this
month, replacing Ben van Beurden who spent nine years as chief executive.

Sawan, a Shell lifer, inherits a company making record profits but still facing
big questions about its future. Officially, he has been appointed to implement
the energy transition strategy developed by van Beurden. But even a slight
change in approach or tone would have significant implications for the sector,
given Shell’s size and influence.

Principally Sawan must decide whether to direct more of the company’s huge
hydrocarbon-driven profits into low-carbon energy, or whether the current
crisis justifies maintaining oil and gas production levels for longer.

What would be the biggest surprise?

Will any of the biggest western oil and gas majors significantly increase their
existing climate pledges? Much more aggressive cuts in fossil fuel production
and consumption are required for the world to stand any chance of keeping
warming below 2C. However last year’s energy crisis revived fears about energy
security, presenting an opportunity for industry groups to argue in favour of
continued investment in oil and gas during the transition.

Tom Wilson in London

Technology
Trend to watch
Artificial intelligence has taken a leap into the mainstream with “generative”
systems that write, or create images that look like they came from a human.
With capital flooding into the sector, the race is on to turn these systems into
the foundation for a new mass-market computing platform.

ChatGPT, the conversational system launched by OpenAI in late 2022,

demonstrated how this new form of AI could transform the way people work
with computers. The coming year is likely to bring developments on many
fronts, as the capabilities of generative systems extend into areas such as
producing video and audio, and as tech companies compete to apply the
technology to everyday work, communication and entertainment.

Person to watch
Elon Musk: Who else? For the third year in a row, Musk gets the Financial
Times’s pick as the techie to watch in 2023 — though this time, it may be for all
the wrong reasons. Even if he makes good on a promise to step aside as the
chief executive of Twitter, his personal ownership and near-constant presence
guarantee that his antics at the social media company will keep him in the
headlines.

Of greater importance to the tech world, however: will Musk get back to what
he does best, helping to turn electric vehicles and space rockets into important
new industries? His giant Starship rocket could soon get its first orbital test
launch, potentially ushering in an era of much lower-cost space flight. And
after a 63 per cent slide in its stock price from the peak, Tesla shareholders will
be hoping Musk has his sights in 2023 set squarely on consolidating his lead in
the fast-growing EV market.

Elon Musk at the Fifa World Cup final match in Qatar on December 18 © David Nivière/ABACA/Reuters

Biggest risk
A severe change in the financial climate in 2022 has already hit tech hard,
letting the air out of the bubble in growth stocks. This would be compounded if
an economic downturn follows in 2023, turning a sharp valuation adjustment
into a broad-based rout in the industry.

Many tech companies have already been struggling to deal with the aftermath
of the boom, cutting workers and paring back investments. An economic
crunch that also hit demand for their products and services would force many
companies to cut much deeper and threaten to turn the post-Covid hangover
into an outright tech depression.

What would be the biggest surprise?

If one of the big tech companies decides to voluntarily spin off a significant part
of its business, without waiting to have its hand forced by regulators.

The sheer scale of the biggest tech giants has made them increasingly difficult
to manage. And with regulators breathing down their necks, there is a risk that
senior managers will become distracted and overly cautious. What better
answer than to unpick parts of their operations and attempt a return to their
entrepreneurial roots?

Richard Waters in San Francisco

Private Capital
Trend to watch
Private equity giants such as Blackstone, CVC and KKR are considered “patient
capital”. Their funds can last a dozen years or longer, affording them the luxury
to wait out shifts in markets caused by unexpected events such as the war in
Ukraine.

Time is now becoming their enemy. Soaring interest rates have nearly doubled
interest costs for many leveraged portfolio companies. It transfers value to
lenders and creates a headache as debt maturities near.

Frozen capital markets, meanwhile, have made it hard to sell businesses and
return capital, creating illiquidity problems for investors and cutting cheque
sizes for new funds. The clock is ticking on valuations, too. Buyout groups are
slow to mark down their portfolios when markets fall. Year-end audits,
however, may finally force them to acknowledge writedowns from tumbling
public market values.

Biggest regulatory risk

Jonathan Kanter, the head of the Department of Justice’s antitrust unit, is
leading a sweeping reform of enforcement that gives much more focus to
private equity.

Kanter is worried about the size and influence of the industry, telling the FT
“we’re seeing a once-in-many generation(s) shift in how markets function” and
a “once-in-century inflection point in terms of reach of corporate power”.

Already, his tougher enforcement approach has caused dealmakers to rethink

mergers and forced a number of executives to resign from overlapping
corporate board seats. It is an opening salvo.

Jonathan Kanter is leading a sweeping reform of enforcement that gives much more focus to private equity © Stephen Voss/FT

Person to watch
Orlando Bravo, the billionaire co-founder of Thoma Bravo, has stood out for
his ability to raise capital and quickly invest it. In about two years, his firm has
raised more than $55bn and agreed to take more than a dozen public software
companies private.

Bravo remained aggressive last year, agreeing to leveraged buyouts for seven
listed companies since Russia’s full-scale invasion of Ukraine. He will now have
to show he did not overpay, as rising interest rates hit technology valuations
and ballooning financing costs eat into cash flows.

Pension and sovereign wealth investors will be watching closely.

In recent deals, Thoma Bravo has used as much as $8bn in equity to clinch
takeovers, relying on unconventionally large direct investments from deep-
pocketed investors. Whether these deals can earn sufficient returns remains to
be seen.

What would be the biggest surprise?

A classic playbook in private equity is to increase the size and geographic reach
of investments with acquisitions, creating economies of scale. The same
strategy may apply to buyout groups themselves as they merge with larger asset
managers such as BlackRock.

Larry Fink has resisted large deals in alternative assets but tumbling market
multiples may present the opportunity to hunt for big game. The rise of the
retail market and slowing industry growth has only bolstered the value of
BlackRock’s distribution capability for potential sellers.

Antoine Gara in New York

Commercial property
Trend to watch
No-one involved in commercial property anticipates an easy ride in 2023. A
downturn has already begun and is expected to worsen. The question being
asked by analysts and investors is: how far will the market fall before it reaches
a new equilibrium?

Owners of offices, shops and warehouses around the world were still figuring
out what impact the pandemic has had on their tenants when they were hit by
rising interest rates last year.

The market is recalibrating as the long era of cheap money, which has drawn so
many new investors to the sector since the financial crisis, comes to a juddering
halt.

Higher borrowing costs, inflation and the threat of recession will push some
landlords to the brink in 2023, and the expectation is that forced sales will
begin in earnest within the first half of the year, as property owners have to
refinance loans at far higher rates or sell assets to meet redemption requests
from their own investors.

The downturn in the commercial property market is expected to worsen © Charlie Bibby/FT

Person to watch
Sandeep Mathrani took over as WeWork boss in 2020 with a simple promise:
he would drag the shared office company to profitability.

Once the poster child for fast-growth start-ups, WeWork became a story of
corporate hubris as its $47bn valuation tumbled and a public listing floundered
in 2019.

Mathrani has avoided the spotlight his predecessor Adam Neumann relished
and slashed costs, but WeWork remains lossmaking. Mathrani’s ability to turn
a profit in 2023 will give some indication of how other debt-laden companies
will fare in the fast-changing world of work.

Biggest risk
In 2022, the phrases “stranded assets” and “zombie offices” drifted into the
lexicon of property agents and investors. Both describe the slew of older
workplaces that will fall short of new environmental legislation that is being
phased in.

This year that new regulation will continue to eat away at the value of offices.
Landlords will need to invest in their buildings to meet new rules and keep
attracting tenants. But against a grim economic backdrop, their ability to do so
will be severely tested.

What would be the biggest surprise?

A return to the “old normal” for office landlords. Throughout the pandemic,
even as workplaces were completely emptied, property owners maintained that
the good times would return and staff would flood back given the chance. That
idea now looks fanciful. Occupancy rates are half pre-pandemic levels in the
UK and remain far down in the US too: hybrid working looks like it is here to
stay.

George Hammond in London

Cryptocurrencies
Trend to watch
After a major market crash in the summer — defined by job cuts, insolvencies
and the collapsing price of tokens such as bitcoin and ether — the industry was
rocked again in November by the bankruptcy of crypto exchange FTX.

Its collapse has undermined one of the industry’s sacred tenets: that
decentralisation is its fundamental feature and strength. Recent data also
suggests concentration and centralisation. Data provider CryptoCompare
found that Binance, the world’s largest exchange, has a more than 60 per cent
share of spot and derivative crypto markets.

The crypto industry lost an array of once-prominent businesses last year and
the question of decentralisation is likely to arise again in 2023.

FTX founder Sam Bankman-Fried is extradited from the Bahamas to the US on December 21 © Royal Bahamas Police Force/Reuters

Person to watch
The downfall of Sam Bankman-Fried means the troubled crypto space needs a
new advocate. 

Cathie Wood’s Ark Investment Management has lost almost $50bn in assets
from its exchange traded funds since its 2021 peak, but the outspoken bitcoin
evangelist may become an industry flagbearer in 2023. 

Unshaken by the collapse of Bankman-Fried’s FTX in November, Wood has

predicted bitcoin will be valued at $1mn by 2030. 

However bitcoin has endured a horrible 12 months, losing more than 60 per
cent of its value since January 2022. If the industry’s flagship token recovers
this year, Wood’s unwavering faith in “disruptive innovation” will not be far
behind.

Biggest risk
In the aftermath of FTX’s collapse, crypto exchanges are under scrutiny from
consumers and regulators asking whether they are financially stable.

Some exchanges have since committed to issuing proofs of reserves. Binance

has said it holds more than $60bn in assets, enough to meet customer
withdrawals.

Yet, the company’s disclosures do not include its liabilities, making it difficult
to ascertain its financial health. In a market now plagued by consumer anxiety,
the stability of businesses such as Binance remains a big worry for regulators
and consumers.

What would be the biggest surprise?

Before he became SEC chair, Gary Gensler won a certain amount of popularity
among crypto enthusiasts for teaching a course on blockchain technology at the
 Massachusetts Institute of Technology.

Since then, his tough regulatory stance on crypto has lost him support among
many industry advocates. It would be a huge surprise if they learnt to love him
again.

Scott Chipolina in London

Copyright The Financial Times Limited 2023. All rights reserved. Reuse this content Comments

Explore the series

READ MORE The world in 2023

The 2023 outlook research
report dump

Currently reading:
Business trends, risks and people to watch in 2023

Five big finance questions for 2023 Premium

The 2023 outlook research report dump

The Year Ahead: expect the unexpected

Energy predictions for 2023 Premium

UK economists’ survey: ‘miserable’ year ahead for households

ESG themes to watch in 2023 Premium

See all 9 stories

Follow the topics in this article

Energy sector Add to myFT

Private equity Add to myFT

Cryptocurrencies Add to myFT

Companies Add to myFT

Commercial property Add to myFT

Comments

Support Legal & Privacy Services Tools Community & Events More from the FT Group

View Site Tips Terms & Conditions Share News Tips Securely Portfolio FT Community

Help Centre Privacy Policy Individual Subscriptions Today's Newspaper (ePaper) FT Live

Contact Us Cookies Group Subscriptions Alerts Hub FT Forums

About Us Copyright Republishing Business School Rankings FT Board Director

Accessibility Slavery Statement & Policies Executive Job Search Enterprise Tools Board Director Programme

myFT Tour Advertise with the FT News feed

CareersCookies on FT Sites Follow the FT on Twitter Newsletters

Feedback

FT Channels Currency Converter

We use cookies and other data for a number of reasons, such as
keeping FT Sites reliable and secure, personalising content Secondary
and Schools
ads, providing social media features and to analyse how our Sites
are used.
Markets data delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2023. FT and ‘Financial Times’ are trademarks of The Financial Times Ltd.
The Financial
Manage Times and its journalism are subject to a self-regulation
cookies regimecookies
Accept under the FT Editorial Code of Practice.