With so much political uncertainty and evidence of a slowdown in parts of the world, some economists are predicting a recession.
David Blanchflower, a former member of the Bank of England’s interest rate setting committee, has even drawn comparisons to the run-up to the 2008 banking crash.
Preparing for the unknown is overwhelming, but there are some key measures that can be taken to safeguard your business.
Is a global recession inevitable?
According to the UN we are on track for a global recession in 2020. As well as other factors, this is due to weaker growth in both developing and advanced countries.
Factors such as trade wars, currency fluctuations, and Brexit are all amounting to an uncertain global economy. According to the Unctad report, “global growth will fall from 3% in 2018 to 2.3% this year – its weakest since the 1.7% contraction in 2009”.
Because of this global strain, we are expected to encounter rising levels of debt (in both developing and advanced countries), as well as a “global downturn that could increase unemployment and inequality” (as stated by Kristalina Georgieva of the International Monetary Fund).
How will the UK be affected?
It is unlikely that the UK will be unscathed by any downturn. The US trade war with China may be easing but has caused a larger drag on global growth than anticipated, and the UK will suffer repercussions.
At best, the uncertainty caused by Brexit has created a hesitant consumer base in the UK. Customers are spending less and are more cautious of businesses. It is a difficult time to maintain customer loyalty, as would-be consumers are tightening their purses.
Leaving the EU with no deal could spell financial disaster. According to forecasts from Andrew Sentance and David Blanchflower, leaving the EU with no deal would plunge the UK into its first recession in a decade. Boris Johnson’s new deal might negate this threat, but after the transition period (which will last around a year), we could still end up in a no deal situation if there is no free trade agreement.
What can you do to make sure your business is ready?
In the circumstances it is always worth making efforts to ‘recession-proof’ your business. Businesses that prepare for every eventuality are the ones that survive and thrive in the face of adversity. Leaving it too late to implement a recession strategy could be your undoing, so get ahead of the game and prepare for a post-Brexit Britain. Here are some key strategies that will help your business face economic uncertainty:
- Focus on existing customers — as we have discussed, consumers aren’t spending as much due to lack of trust and growing apprehension. Because of this, it is essential that you focus on your existing customer base during testing financial times. This will increase brand loyalty and grow customer confidence. Offer them benefits and reasons to stay true to your brand.
- Put some adjacency and extension strategies in motion — a recession is not the time to start looking into completely new avenues of profit. However, you can’t let your services become stagnant. Adjacency strategy is the optimum solution to this — find an area adjacent to your core product or services to expand into. Extension strategy is similar: take your current service a little further and offer new and exciting opportunities or products to existing customers. Ensure that you have a flexed forecast so that the business is fully prepared for all possible outcomes of this new strategy.
- Forge some powerful alliances — mergers, acquisitions, and alliances are all key strategies during a recession. Alliances offer a great way to expand your business without investing in anything completely new during times of uncertainty.
- Don’t be afraid to outsource — outsourcing key elements of your business can save you time, money and financial anxiety during a recession. Outsourcing your accounts department may allow you create scale and flexibility within your organisation.
- Reduce inventory costs — look to see if your business has the leeway to reduce costs without sacrificing the quality of the services or products it provides. This will help to take the pressure off your finances.
- Don’t sacrifice your marketing budget — often, brands make cuts to their marketing budgets in response to financial anxiety. However, this will spell disaster for your company. There is no time more crucial to maintain your marketing efforts and show customers that your brand is tackling the recession and winning.
- Tighten up on your corporate governance – companies that see a downturn in performance are more likely to survive if they have good corporate governance embedded into their culture. Part of this is ensuring that the company has had a financial audit.
Sources
https://fullfact.org/europe/boris-johnsons-new-brexit-deal-four-key-questions-answered/
https://www.theguardian.com/business/2019/sep/25/global-recession-a-serious-danger-in-2020-says-un
https://www.theguardian.com/business/2019/sep/27/brexit-uncertainty-pushes-uk-to-brink-of-recession
https://www.thebalancesmb.com/business-thrive-tough-economy-2948298
https://www.theguardian.com/business/2019/sep/09/kpmg-predicts-no-deal-brexit-recession-in-2020
Leave a Reply