The global pandemic has not just affected health, it has hit the global economy, causing trouble for countries across the world—including the UK, which has entered its second recession in only 12 years.
Before Covid-19 caused a global pandemic, we were already close to another recession. Here, economist David Blanchflower compares the pre-banking crash of 2008 to the pre-covid world. Blanchflower’s comparisons give us an insight into how the 2008 recession can become a how-to guide for how businesses can survive the 2020 recession. If this pandemic has taught business owners anything it would be that they need to take extra measures to protect their businesses.
Andrew Millet from Wisteria, created the business in 2002 after operating as a CEO and CFO in a number of companies in biotech, recruitment, media, technology and marketing. Here Andrew looks at how you can safeguard your business through turbulent times.
A global recession
In the first months of 2020 before Covid-19 had impacted half of the globe, the UN had already warned us that a global recession could be coming. Factors including trade wars, currency fluctuations, and Brexit were all amounting to an uncertain global economy, and 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.”
The result Covid-19 has had on the global economy combined with the pre-Covid situation could create a bigger recession than the Great Depression. As of June, the global growth projection for 2020 had fallen to -4.9 per cent (1.9 per cent below the forecast made by the World Economic Outlook (WEO) in April). In addition, the WEO initially predicted a faster recovery period, but now they are only forecasting a 5.4% global growth for 2021, 6.5% lower than the predictions before Covid-19.
The situation with the global economy suggests that the debt level will rise across developing and advanced countries, which will lead to more redundancies and less jobs available. Not only that, but a “global downturn that could increase unemployment and inequality” may be on the cards, as stated by Kristalina Georgieva of the International Monetary Fund.
What will be the effect on the UK?
The Organisation for Economic Co-operation and Development’s newest reports suggest the UK is likely to be the worst hit country in Europe— the economy is forecasted to contract by 11.5% and up to 14% if we unfortunately get a second Covid-19 wave. Since our country relies on the service industry for economic growth, the UK is likely to experience a stark economic problem due to the damage done by Covid-19.
Ways to protect your business
The best way to keep your business safe against the effects are the recession is planning. Businesses that plan ahead in times like this are the ones that survive and thrive in the face of adversity. Not implementing a recession strategy could be fatal for your business.
These key strategies will help your business face economic uncertainty:
- Create some adjacency and extension strategies—a recession is not the best time to start looking for new avenues of profit, remaining stagnant should be avoided. Adjacency strategy is the optimum solution for 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.
- Focus on current customers—since consumers aren’t spending as much due to the uncertain future, it is essential that you focus on your existing customers. By offering them additional benefits, it will increase brand loyalty and grow customer confidence.
- Do outsource—outsourcing important parts of your business such as your accounts department, can save you time, money, and financial anxiety during a recession.
- Improve your corporate governance—businesses that are likely to see a fall in performance are more likely to be OK if they have a good corporate governance culture. Part of this is ensuring that the company has had a financial audit. If in doubt, contact an audit accountant for further advice and help.
- Create powerful alliances—creating mergers, acquisitions, and alliances are important strategies to have during a recession. Alliances offer a great way to expand your business without investing in anything completely new.
- Don’t scrimp on marketing—the first cuts to make when things get hard are usually to the marketing budget. However, there is no time more crucial to maintain your marketing efforts and show customers that your brand is tackling the recession and winning.
No one knows what will happen in the next few months. Safeguarding your business is the most important way to support your business through the ‘Covid-19 recession’. The road ahead does not look easy but putting certain measures in place and responding when necessary will help recession-proof your business.