Governance, risk & compliance
As recession looms, global economic growth is set to cool to 2.9% in 2022, down from 5.7% in 2021.
time, though, there are a lot of other businesses that are much more recession-proof to start with.” Steel adds that, while businesses have already had their resilience tested over the past few years, they should not assume that what worked in 2020 will work in 2023.
“What you saw during the pandemic was effectively a very short, very sharp reduction in demand,” he says. “The issues you’re seeing in the economy at the moment are mainly supply-side issues with things like inflation, increasing wages, global supply chain shocks, oil prices. So it’s completely different from the pandemic – in fact, the pandemic is not even a good data point to draw on.”
Facing the storm
As an AI-powered healthcare provider, Babylon Health sits at the intersection of two post-Covid growth industries: health and tech. The company has posted strong results in recent months, comparable to other tech startups in their ‘take-off’ years. Its Q2 revenues grew nearly fivefold year-on- year, following the signing of new US value-based care agreements, while revenues for 2022 are expected to top $1bn. Despite this momentum, Babylon has not been unaffected by the financial headwinds. The company, which went public last October, has already made a number of tough decisions in its bid to achieve profitability. “We’re very cognisant of the fact that markets have moved and the discount rate has changed,” says Steel. “We’re making sure we’re building the business to respond to that.” In July, Babylon said it planned to implement ‘revenue and cost efficiencies, in response to
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changing market conditions’. These cuts – which the company has not specified – will come into effect in Q3, and are set to generate savings of up to $100m a year. Bloomberg reports that they may include some job losses.
“We announced very recently that we’re doing a cost reduction exercise, which I think goes back to how we think about the financial flexibility of the business.”
“We announced very recently that we’re doing a cost reduction exercise, which I think goes back to how we think about the financial flexibility of the business,” says Steel. “Basically, we’re making the business a little bit leaner and making sure that we can respond to change extremely quickly.” Babylon has also reportedly terminated contracts with two NHS trusts in the UK. Speaking to TechCrunch, Babylon’s Tim Rideout blamed NHS funding pressures and the rising costs of capital. He said the company was trying to be “ruthless at focusing on the things where we can make a real difference”.
Even so, Steel remarks that Babylon’s growth in top-line revenue is poised to continue, albeit probably at a slower rate than before. To an extent, he sees the current market conditions as an opportunity in disguise.
“All this healthcare technology that people were previously allocating capital to is now being cut by various businesses,” he says. “It means we can be the people still investing in this. We’ve seen before
24%
The percentage of CFOs who report credit as costly.
Deloitte 2.9%
How much European and Central Asian economies are projected to shrink by in 2022.
World Bank 41
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