Infographic: will shrinking workforces spark a new industrial revolution?

As baby boomers retire, the working age populations in many of the world’s largest economies is forecast to begin contracting.

The result will be fewer available workers, weighing on growth and exacerbating inflationary trends in the global economy.

That’s why demographics is one of the “3Ds” we see as shaping a new economic regime. Major shifts in the three areas of demographics, deglobalisation and decarbonisation are driving a 3D Reset.

How companies respond and the investment implications

How companies and policymakers, whether governments or central banks, respond to the 3D Reset will be crucial to understand.

Less supportive globalisation trends linked to rising protectionism, will limit the response to demographics through the relaxation of immigration controls, for instance.

Azad Zangana, Senior European Economist and Strategist, says:

“The rise of populist politics has meant that populations are less willing to allow migrants to come in and fill roles, so companies are having to think of alternative solutions to the labour shortages.

“The shortage of workers will force companies to begin to make greater use of robotics, automation and AI in order to manage their rising costs.”

There are many uncertainties around the investment implications, not least due to the speed of change.

Where previous industrial revolutions took decades to create large scale impact, AI-first companies are registering that impact in months.

But investors are seeing some clear “second-order” impacts from AI trends which are set to touch many industries.

Nils Rode, Chief Investment Officer, Schroders Capital, says:

“The AI revolution is driven by venture capital backed start-ups, so venture/growth capital is the place to be for investors who want to get direct exposure to this mega theme.

“Additionally, we expect the impacts of AI to have second-order impacts on the real estate and infrastructure markets.

“The substantial data processing requirements and the production of even more data through AI is giving a further boost to demand for data centres, creating tailwinds in this area.

“Furthermore, AI’s massive compute appetite needs substantial energy resources, that we see as an opportunity for infrastructure investments, particularly in renewable energy.”

Daniel McFetrich, Head of Global and International Equity Research, says:

“We are witnessing a multi-year transformation of factories, warehouses and industrial assets.

“This will revolutionise not just how we manufacture, but also how we distribute, design and monitor assets in the field.

“The increasingly quick paybacks on these investments, faster and more reliable communications networks, and ageing demographics all mean the desire and need to invest is accelerating now.”

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