Protect your business in the UK recession
Since the beginning of the economic downturn in November 2022, experts have stated that they expect it to last at least until 2024, if not longer. The British Chambers of Commerce (BCC) is forecasting a five-quarter recession for the UK economy which began in Q3 of 2022. The UK GDP growth forecast for 2022 is 4.2%, -1.3% in 2023 and 0.7% in 2024. This all stacks up to a significant reduction in business confidence.
The impact on businesses comes after already facing significant challenges with record high inflation and wage rises, the cost-of-living crisis, Covid-19, supply chain issues and costs, energy price hikes and the impacts of the Ukraine war and Brexit, as customers find their disposable income being hit hard with an increasing minority struggling to make ends meet and their spending power drastically reduced.
How to help safeguard your business from the recession
The picture is undeniably bleak and as we await Sunak’s delivery of the Spring Budget on 15th March and what support (if any) for businesses will look like, there are some things to be done that can help business owners to protect themselves from the worst.
Naturally, the reduction in business confidence is meaning a fall in investments as businesses sharpen their focus on doing what they can to ride the recession.
Michael Hall, Insolvency Practitioner, outlines his top 5 recommendations as to how businesses can help to protect themselves.
Credit control in the recession
If you’re a Financial Director or Credit Controller, you’ll likely be the first person to spot issues with credit and possibly, that your business may be struggling. Maybe one of your clients or suppliers has gone bust, or payments are being delayed and maybe your creditors have suddenly stopped communicating with you.
Mark Roach, Insolvency Practitioner, outlines what to do when one of your customers has gone bust in his blog here (insert blog link)
Some sectors are being hit hard
The construction sector and associated businesses are already being affected – history has told us that during a recession the construction industry is usually the first to be hit as companies stop investing in development and infrastructure.
The sector has already been squeezed by huge increases in raw materials and supply chain challenges, the recent and sudden slump in the house sale market together with mortgage interest rate rises and a drop in real wages.
The construction sector, which makes up 7% of the economy, is driving overall insolvencies to a 13-year high and construction output is forecast to fall by 3.9% in 2023 (Builders Merchants News). The number of company insolvencies in the construction sector in Great Britain soared in 2022. From January to June of that year, there were 568 insolvencies less than in all of 2021 (Statista Research, 2022).
As many of us are aware, hospitality has been affected by Covid, worsened by staff shortages, food inflation and a surge in energy costs. This is coupled with an expected reduction in travel and tourism as the recession deepens.
British pubs are closing at an alarming rate. From June to September 2022, 150 pubs were demolished or had a change of use – up 50% on the 200 pubs that closed from January to June 2022.³ Last November, Wetherspoons announced it will sell 39 more pubs as sales slow and costs escalate.
Alarmingly, over a third of the UK’s hospitality sector say they’re at risk of closure early this year due to higher costs, soaring energy bills and weakened consumer demand, a recent survey showed.
The Insolvency Service figures show that the number of restaurant and food outlets going into liquidation increased from 108 in June to 158 in August 2022 – an increase of nearly 50% in insolvencies.
What to do if your business is in trouble?
Businesses that are struggling are advised to seek help early on. But what factors mean that a business is in trouble and what sort of help should the business owner be seeking?
This video with Lucinda Coleman, Senior Partner in Business Recovery at PKF Francis Clark explores why businesses get in financial difficulty and what they can do about it. Lucinda discusses short-term cash flow, long term projections, business plans and what directors can do.
Our focus is on trying to rescue the business wherever possible to try and avoid insolvency. We offer a first meeting for free with our Licensed Insolvency Practitioners – call us on 0330 134 4871 or find out more about Business Recovery.
How does this stack up for investments?
For individuals with investments comes the difficult question of what (if anything) to do as they are understandably concerned about the value of their portfolio.
Mashud Rahman, Investment Consultant at Francis Clark Financial Planning gives recommendations on what do with investments in the UK recession.
Get in touch
Every business is different, and you need to think carefully about the approach that is best for you. Start early to plan for this challenging period.
Our Business Recovery experts are here to help you navigate the issues involved. If you would like support, please get in touch.