Both public safety and the global economy are experiencing uncertain times due to the Covid-19 pandemic — not to mention the fact that the UK has entered its second recession in 12 years.
Even before Covid-19 became a global pandemic, we were on the brink of another recession. Economist David Blanchflower compared the pre-banking crash of 2008 with the pre-Covid financial situation. If this has taught business owners anything, it would be to take extra measures to protect their companies.
An internal recession
At the beginning of 2020, even before Covid-19 impacted the globe, the UN warned us that a global recession could be on the cards. Factors including trade wars, currency fluctuations, and Brexit were all amounting to an uncertain global economy, and 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 unstable and difficult-to-predict circumstances of the global economy.
After considering the economic impact Covid-19 had on the already uncertain situation, we could see a recession hit that even the magnitude of the Great Depression could not rival. As of June this year, 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 per cent global growth for 2021, 6.5 per cent lower than the predictions before Covid-19.
As a result of the strain placed on the global economy, it is suggested that the debt level in both developing and advanced countries could rise even further, leading to more redundancies and fewer job vacancies. Not only that, a “global downturn that could increase unemployment and inequality” may be on the cards, as stated by Kristalina Georgieva of the International Monetary Fund.
How much will the UK be affected?
Unfortunately, the OECD’s (Organisation for Economic Co-operation and Development) latest reports predict that the UK will likely be the worst hit country in Europe, with the economy forecasted to contract by 11.5 per cent, and 14 per cent if a second wave of Covid-19 hits later this year.
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.
Knowing how to protect your business
To help safeguard your business against the financial effects of the recession, planning ahead is key. 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:
• Develop some adjacency and extension strategies — although a recession is no time to start looking for completely new avenues of profit, remaining stagnant should also be avoided. Adjacency strategy is the optimum solution to 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. The use of loyalty programs is also highly recommended to lock in existing customers.
An example of a business growth strategy designed to plan for any uncertain occurrences.
Focus on existing customers — since consumers aren’t spending as much due to lack of trust and growing apprehension, it is essential that you focus on your existing customer base. By offering them additional benefits, it will increase brand loyalty and grow customer confidence.
• Don’t be afraid to outsource — outsourcing key elements of your business e.g. your accounts department, can save you time, money, and financial anxiety during a recession.
• Tighten up on your corporate governance — companies that see a downturn in performance are more likely to survive if they have good corporate governance embedded into their 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.
• Forge some powerful alliances — mergers, acquisitions, and alliances are all key strategies during a recession. Alliances offer a great way to expand your business without investing in anything completely new.
• Don’t sacrifice your marketing budget — often, brands make cuts to their marketing budgets in response to financial anxiety. However, there is no time more crucial to maintain your marketing efforts and show customers that your brand is tackling the recession and winning.
Although no one knows for certain what lies ahead over the next coming months, safeguarding your business in preparation for what can now be dubbed the ‘Covid-19 recession’ is vital. The road ahead does not look easy, but putting certain measures in place and responding when necessary will help recession-proof your business.