How the UK recession can benefit your businessFeb 06, 2023
Forget the doom sayers… UK recession history shows that this can actually be good for your business! maake discusses the opportunities available during an economic slowdown
We’ve all heard about the recession expected in the UK during the last 3 months of this year, and continuing into the coming year. Don't get upset – there are incredible opportunities to grow your business at this time, if you are prepared to look at your business from a different perspective.
The UK recession 2022 – what is it and what’s expected to happen in the coming months
What is a recession?
A financial recession is a big deal. It’s a time when economic activity declines over a number of months. We’re talking about higher rates of unemployment, a decrease in consumer spending and a decline in the Gross Domestic Product (GDP). These incidents result in a change in the way we live on a daily basis.
What to expect during the UK recession in the next few months
According to the Economist, further declines in the economy are expected in the UK. These are a direct cause of Russia’s invasion of Ukraine (look at the hike in the price of petrol, for example), Brexit and inflation caused by businesses reopening after the Covid lockdowns.
An article in The Evening Standard discussed how Andrew Bailey, Governor of The Bank of England, announced that inflation will hit 10% by the end of the year – that’s the highest rate since 1982. To try and stave off inflation, the Bank raised interest rates to 1 per cent, the highest rate in 13 years.
Politics aside, the recession is uppermost in everyone’s mind. “UK economists have warned MPs that England faces a recession before inflation can be controlled,” the article said.
There’s also talk of an interest rate rise to 2% by the end of 2022 and 2.5% in the year to follow.
The current recession is apparently expected to continue until the end of 2023. The last time there was a global financial crisis was between 2007 and 2009 and the time before that was in the early 1990s.
But we should be used to the UK’s economic downturns; data showed that the UK experienced a dive of 20% from April to June in the year 2020 because of Covid lockdowns.
What happens in a UK recession?
- Increase in the cost of living: It’s common for the cost of everyday essentials (groceries, petrol, clothing, energy prices) to increase in price. When this happens, people find it hard to pay their bills, so they try to budget and cut down on expenses, particularly household energy bills and groceries.
In fact, earlier in August 2022, ex-chancellor Rishi Sunak pledged to stop inflation from reaching 15% if he became Prime Minister, after warnings that it could reach levels not seen in 4 decades.
- People spend less money: This is a direct result of the raised cost of living crisis and people having less money to spend.
- Loss of jobs: Businesses often cut down on staff during hard economic times. Many UK workers face losing their jobs or a reduction in the number of hours they work.
- A rise in unemployment: As companies let staff go during a recession, it’s also very hard to find a job if one is already unemployed or loses their job at this time.
- Manufacturers cut down on production: Many businesses cut back on manufacturing products because materials are so expensive. This decline could lead to less exports and an overall drop in the economy’s activity.
How soaring inflation will impact Britain’s businesses
Expect the following:
- Less profits
- Less money to spend,
which will make product quality suffer
- Less cash flow.
And now for the good news…
Recession and inflation is the time to turn your business around. After all, many successful global companies started out in the longest recessions.
That’s because when the economy dives, growing a business while others are holding back offers excellent opportunities. Here’s why…
- As businesses close down or pull back, there’s less competition in the markets. So this is the perfect time to promote your business, or start one.
- When businesses are cutting down and letting staff go, it’s the perfect opportunity to get a foot in the door. You can take advantage of a gap in the market.
- This is the ideal time to get the attention of your target audience.
- Your customers are very different during recessionary times – they’re more careful and selective. Send them reassuring messages that resonate with the way they’re feeling at this time.
The positive approach to business
What positive events occur when there’s a recession?
- Your regular suppliers may offer you excellent deals. They often lower their prices of raw materials and other supplies necessary for you to run your business.
While they are doing this to attract more customers, you can use it to your advantage to keep your business afloat. You can even negotiate better long-term deals at much less than you had expected to pay.
- You can get cheaper office rentalswhen companies close their doors or start working remotely.
- There's a lot of talented and experienced staff available. When companies restructure or get smaller, there’s an influx of experts looking for jobs.
Sadly, the most qualified people are also the highest earners, so they tend to lose their jobs first. Also, you may be able to hire these employees at less than you’d paid previously, when the UK economy was booming.
- If you have the resources to start a new business, or expand, this is the perfect time. A number of innovative businesses have started in recessions.
With access to talented staff, less expensive costs to manufacture and less competition, it’s a great time to succeed.
How your business can survive in a recession
According to The Economist, the business world we currently live in is very different from the one that experienced a global recession last time (we’re talking about 2007). The Bank of England warned that this may be the next big economic downturn.
But you can take something positive from this:
- If you prepare for the onslaught, your business could benefit.
- High inflation means raised interest rates, so if you have money in your account, you'll benefit from this.
- This is a good time to borrow money, as your loan repayments will be less than during a booming economy.
- Look for innovative ways to cut costs without losing on productivity or quality.
- Look after your customers – good customer service is important.
- Market your business differently. Take the current circumstances into account when making a business strategy.
Remember what sets your business apart and makes it special. Look for less expensive marketing tools like social media and by word of mouth.
- It is important to network with other businesses through LinkedIn and other social media resources. You need to know how your competitors are managing and what they’re doing to survive.
Communicating with others in the same industry will also give you an idea of what the trends are and could even lead to fresh opportunities.
- Think about your business’ operating procedures. Perhaps you need new technology to compete in the current environment? This would be a great investment now.
- A financial recession doesn't last, so plan for the interim; it will be over before you know it.
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