Following the shock of the COVID-19 pandemic, the United Kingdom has undoubtedly faced its fair share of economic challenges in recent years. Despite various levels of government intervention, the economy continues to show warning signs of trouble with inflation remaining much higher than the Bank of England’s 2% target and consumer confidence waning. This has led many of us to ponder the question of ‘Is the UK in a recession?’.
As of September 2023, the UK is not in a recession. However, it is still vital for us to explore the current state of the economy alongside what this means for businesses currently navigating the complex economic landscape.
What Is A Recession?
A recession can be defined as a period of significant and sustained decline in a country’s economic activity. Recession is typically measured by a decrease in Gross Domestic Product (GDP) over two or more consecutive financial quarters, though other factors such as reduced consumer spending, increased unemployment and a drop in housing prices can also indicate such economic contraction.
The Current State Of Play
According to the latest data from the Office For National Statistics, UK GDP has grown by 0.2% in the three months to June 2023. This means that, despite a decline in GDP in both April and May this year, the UK is not currently in recession.
However, with house prices falling at their fastest rate since 2009 and continued Bank of England base rate rises, the UK economy is still turbulent and recession is still possible as we rapidly approach 2024. This marks a continuation of a complex economic landscape following the COVID-19 pandemic and the added uncertainty and pressure of subsequent supply chain issues, inflationary pressures and shifting consumer attitudes in response to the cost of living crisis.
What Does This Mean For UK Businesses
Despite the fact that the UK is currently not in recession, the current state of play is still challenging for UK businesses and it’s always wise to be prepared for a recession. Flat economic growth and high inflation pose significant challenges for companies both big and small and it’s important to consider the following things as you navigate economic uncertainty.
Market Volatility
An uncertain economic outlook can lead to regular shifts in the market and subsequent volatility. It’s important that businesses are aware of this possibility if they are not already, as a volatile market tends to create fluctuating customer demand and disruption to supply chains. Try and stay ahead with planning and forecasting, but be as agile as possible to limit the chances of being caught short by a sudden shift in behaviour or conditions.
Limited Finance Options
During periods of flat economic growth or worse, recession, business finance options can be limited. Lenders tend to be extra cautious when the economy is troubled in this way and this can reduce the borrowing options on the market. This may mean that reviewing current financial strategies is more suitable than accessing new finance options in the current economy.
Importance Of Cost Management
Economic contraction highlights the importance of effective cost management. From managing employee costs effectively to reducing overhead costs, there are a number of measures that you can take to improve your competitiveness in the face of uncertainty. By prioritising essential spending and reflecting on current policies, businesses can increase their chances of maintaining profitability even in times of little or reduced market growth.
What To Do If Your Business Is Struggling
Taking preventative measures to protect your business during economic downturn is vital, particularly if you have already identified that you are struggling to navigate the complex current market. Stay informed when it comes to the latest GDP reports and interest rates and be willing to make changes to improve efficiency and reduce costs within your business.
If your business is concerned, it’s also a sensible idea to speak to a business rescue expert. While business rescue specialists are often associated with companies in definite financial difficulty, they can also provide trustworthy advice and guidance to those unsure how best to move forward in the current economic conditions. The team here at Ballard Business Recovery has years of experience helping companies of all sizes navigate uncertainty and work through a suitable recovery strategy. Simply get in touch with the team today if you are worried about your situation or the prospect of recession in the UK.
