The Office of National Statistics released official figures last week showing the UK is now officially in recession.
Gross domestic product (GDP) for the October to December 2023 quarter dropped by 0.3%. This followed a fall in the July to September 2023 quarter of 0.1%. A fall in GDP in two or more consecutive quarters constitutes a recession.
Experts will generally assess the health of an economy on a number of factors, rather than solely look at the headline GDP rates. However, the “recession” word quickly takes hold in news headlines and brings apprehension and uncertainty with it.
While it may be a time for concern, proactive measures can mitigate its impact and even present opportunities for growth. Here are some key things for businesses to look at when navigating the onset of a recession.
Boost your financial resilience:
Assess how your business’s finances currently look. Where possible, look to strengthen cash reserves and reduce unnecessary expenses. Are there ways you could diversify your income sources so as to avoid being overly reliant on a small number of major customers?
Prepare cashflow forecasts and see if you can predict where a potential downturn in income might come. Based on this, you may be able to make some contingency plans or time payments on essential expenditure so you don’t leave yourself short at the wrong time.
Analyse your customers’ behaviour:
During economic downturns, spending behaviours generally often change. Priorities are put on essential purchases while what is seen as non-essential or non-urgent is put on the back burner. How will this affect how your customers buy from you? Could you tailor your marketing strategy or the products or services you offer your customers so that they appeal to their current needs and price sensitivities?
Review your supply chain:
It’s a good time to evaluate the resilience of your supply chain. Do you have key suppliers that may struggle with a down-turn? It could be that exploring alternatives would be wise. On the other hand, if you are in a relatively strong financial position, it could be a good time to support a trusted supplier, perhaps ensuring reduced pricing or longer-term loyalty.
Strengthening your relationships with key suppliers and maintaining open communication with them can also help you to anticipate and address potential challenges.
Nurture staff morale:
Continue to invest in and nurture staff morale. Staff can also become anxious in an economic downturn, and this can easily affect morale and productivity. Consider cost-effective strategies that will help you retain talented staff. For instance, flexible work arrangements, skill development programs and performance incentives can help to keep staff incentivised.
Your staff may also have good ideas that will help your business to adapt. Spending time talking with them and giving them the authority to contribute innovative solutions can provide you with a very valuable resource.
Consider strategic investments:
While there are uncertainties in an economic downturn, there are usually also opportunities. It can be well worth exploring investment opportunities if you are in a position to do so.
Look for undervalued assets or potential mergers or acquisitions that can be accomplished for a reduced price. You may be able to capitalise on the downturn to buy assets at a favourable price and position your business for long-term growth.
Research Government assistance:
There are many government assistance programs available, and additional ones may be added to support business continuity through a recession. Policy changes, tax relief measures, funding schemes, and loan financing assistance are all possibilities that your business could take advantage of. Stay informed about what is available, as these programs can provide much needed support.
A recession is a technical marker of the UK-wide economic landscape, but it is not necessarily an indicator for how your business can perform. Keeping a positive attitude will allow you to see the opportunities you have available to you and give you the drive to see them through. Navigating a recession takes good planning and adaptability. But by taking proactive steps your business can not only weather the economic downturn but also emerge stronger and more competitive in the long run.
We are here to support you during tough times, contact us today for advice and support.
