At the time of writing, the UK’s economy seems like it is in a bit of a mess. We are firmly in a UK recession. The new Prime Minister Liz Truss and her Chancellor Kwasi Kwarteng announced they were doing away with the 45% tax rate for the upper end of the earnings spectrum, which disproportionately benefitted the rich. This led to market confidence collapsing, with the pound dropping to an all-time low against the US dollar and also dropping hard against other currencies including the Euro. It also led to the Chancellor departing the Government to be replaced with Jeremy Hunt.
In normal times a weak pound would be excellent news for the exporting sector but because of Brexit, exporting is already more difficult and costly than it has ever been before. The drop in the value of the pound, in theory, removes some of the costs for exporters, but in practice, it is not enough to make the kind of difference it would have if we had still been part of the European Single Market.
The economy has gotten so bad that banks and financial institutions have taken to pausing new mortgages because the market situation is too volatile for them. It is not like financial institutions to be quite this risk averse and the fact that this step has been taken underlines the dire straits that the UK economy finds itself in.
We are also looking at an energy crisis and rising inflation, which is driving living costs to the limits of affordability for large sections of the population and it is understandable that many businesses are worried about how they are going to continue operating in these circumstances. We have looked at five ways that businesses can try to insulate themselves from the worst of the economic harm that is coming.
Top 5 Tips for Combatting the UK Recession
Undertake an Honest Financial Appraisal
It is important when thinking about how to weather the UK recession to look at where your company is positioned and how it is likely to be affected by the various facets of the economic downturn. Having an honest and hard-hitting financial appraisal can mean deciding that you don’t need the amount of office space that you have currently, potentially leading to selling off a city centre property and then renting somewhere smaller on the outskirts. This would reduce both the cost of the office itself and also the related overheads like electricity, which have been spiking drastically lately.
An honest financial appraisal where egos are left at the door can look like deciding to allow more employees to work from home permanently, rather than returning to the office. This not only contributes to the company having happy staff, but it will mean lower overheads and office costs in the longer term.
Resist the Impulse to Abandon Growth Strategies
This may sound incredibly counter-intuitive but the strategies that you use for growth in the good times are the same strategies to use when you need to maintain sales. In times of economic uncertainty, it is important to reassure consumers that your brand is still there, weathering the storm. This means that now even more than usual, it is important to advertise through your usual channels. Scaling back just allows space for a competitor to gain an advantage and begin to squeeze out your influence in the market.
Focus on Employee Retention During UK Recession
Your biggest assets are your employees and there is a large skills gap in the UK right now, which means they are about to become even more valuable. Following the “Great Resignation”, which saw vast numbers of employees leave their jobs across the UK and the wider world, many businesses are struggling to replace the people who left and are struggling to keep their remaining employees.
The struggle to retain employees is partly because the employees who have stayed are largely having to pick up the slack until appropriate replacements have been recruited. Focus on your employees, and offer them the chance to upskill, so that they can take on some of the more senior roles that have been vacated. Let them know that you care about their career progression journey and that you value the transferable skills that they bring to the table.
Recruit Apprentices to Keep Staffing Costs Down
There has never been a better time to think about employing an apprentice and this is because they will be able to help to plug the skills gaps at your company while at the same time, providing excellent value. Apprentices are very cost-effective and apprenticeships are beneficial to both parties, allowing the apprentice to learn the role that they are needed for from the ground up and being able to step right into the role.
Apprenticeships aren’t as complicated as they look from the outside and it can be pretty easy to set one up. There are pre-existing “Apprenticeship standards” which will match your industry and there are education providers who will handle the academic portion of the apprenticeship for you. It allows the young person to gain a qualification as well as the experience of working alongside people in the company.
Build Relationships with Other SMEs
Heading into a UK recession seems a strange time to talk about looking outward rather than inward but being able to build positive relationships with other companies in your local area can spark ideas for partnerships and money-saving ideas. Sometimes it is just good to talk to others about their expectations and get to understand where they are coming from.
Working together to coordinate strategies or to save money by renting a place split between two companies can be an excellent strategy and there will be many benefits from relationship building and networking, even in the most straightened of times.
Brainstorming is at the core of the business world and being able to put your head together with all manner of interesting people can help to formulate the next big idea to move your company forward.
Remember, recessions don’t last forever and opportunities for growth will come again in the future. It is important to be ready to take full advantage.