Much like the current summer weather, the outlook for the economy is not great. So, what should businesses be doing right now to stave off some of the effects of the economic instability?
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Weather forecasting - Strategies for business in UK's Challenging EconomyPosted: Aug 15, 2023

Economic sunshine and showers.

We have gotten used to having a more Mediterranean style summer in the last few years, so this current spell of rainy days and cold nights seems to be a little bit of a surprise to us. The economy has been pretty much the same, with very little sunshine around and a lot of rain on the horizon.

Things are not quite as bad as some of the more pessimistic pundits were predicting, but they are not exactly good either. We seem to have avoided recession (for the moment at least) but, to continue the weather analogy, it isn’t exactly beach weather either. The dark rain clouds from Brexit, inflation, the war in the Ukraine, and rising interest rates, do seem to be spoiling our summer somewhat.

The bottom line is that if you run a business, then you need to be actively adapting to the situation in your marketplace or, sadly, it could impact you in a financially dangerous way.

 

Where are we in relation to business?

Well, I can only generalise in an article like this one, but the short answer is that for many businesses ‘where we are’ is not in a very good place. It’s been a while since we saw anything like the current situation with interest rates or inflation.

If you look at the current figures for insolvencies, you can see a stark warning of things to come. Rather like that sinking feeling your get when you hear the weather forecaster open with ‘well, it’s not a good picture for the weekend’, the first line of the commentary for the June insolvency figures is not encouraging. To quote directly from the Insolvency Service June report:

The number of registered company insolvencies in June 2023 was 2,163, 27% higher than in the same month in the previous year.

A 27% increase is a very worrying trend. Even considering the drop in Covid-19 support and other factors, it’s clear there is an issue here.

The interest rate rises in particular are causing problems by contributing to a reduction in the disposable income of the general public. The recent rises have caused all kinds of issues from reduced high street spending (causing a discounting battle in some retail areas – race to the bottom pricing is never a good sign), to a reluctance to move house, which has subdued the property market and caused the first significant drop in average prices for many years.

According to a recent BBC report, The National Institute of Economic and Social Research (NIESR) predicts that the spending power of the workforce is likely to be stagnant or drop in many areas, with only London and Wales really showing any potential increase relative to pricing. The article then goes on to suggest that the UK will avoid recession this year, which is great news, but still has a 60% chance of going recessive in 2024. That doesn’t bode well for business.

There is a difference between pessimism and realistically assessing the situation. At the moment the latter is far more useful. Even the most optimistic of people need to recognise that the UK economy is not in the best shape. Interest rate rises may well help to control inflation (or so we hope) but they do cause concern among the buying public and reduce spending for already squeezed household budgets.

What should businesses be doing in response to the economy?

Well, as always, the first thing to remember is not to wait if you are having financial problems. There seems little chance that it is going to get better in the short term, so you need to address the situation proactively. If you think you are insolvent, or heading that way, then go to our help for directors section and book an appointment to see us.

Regardless of your current situation though, it’s important that business owners stay in touch with local, national, and, where appropriate, international economic considerations. It may not be fun reading, but you need to know where you stand.

In addition, give some thought to the following areas:

Be logical, be realistic, be practical.

The UK's business landscape, like a British summer, is a mixed bag of good and bad days. At this point in time, we need to be honest and accept most business areas are in a down cycle. However, by embracing flexibility, fostering strong relationships, streamlining costs, and looking for support, businesses can not only survive but maybe even thrive. With the right strategies in place, your business may well emerge stronger and more resilient as the current bad weather passes.

The key to survival will be a realistic acceptance of your situation. The thing to avoid is letting your optimism or emotional bond with your business cloud your judgement. Treat your cashflow and current situation like a shareholder. Someone who has no interest in anything other than whether are currently, or soon going to be, profitable. Be like someone preparing a picnic for a British summer day, be full of optimism and hope for good weather… but pack an umbrella just in case. Most importantly always make sure you know when to accept that the rain is, sadly, just too heavy.

Contact us if you need help with your business finances, we are here to find the best solution, whatever that may be.

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