The UK’s chancellor, Rishi Sunak, has said that the country faces a “significant recession”. The Bank of England says the economy may take its sharpest decline on record. Others predict we could be facing times as hard as the Great Depression of a century ago.
The economy always has been and always will be cyclical, good times following bad, and bad times following good. It was predictable that a recession was on the way.
However, it’s the coronavirus pandemic that will make this occasion so much worse than others in living memory. There will be more failed businesses, more job losses and more bankruptcies than ever before.
The hardest hit will be the short-sighted, who see an economic boom and think it’ll last forever. You’ll recognise them as the ones with cars, technology, holidays etc which are far fancier and more expensive than their pay grade should afford. It’s all built on debt, and they don’t realise that it all has to be paid back at some point.
Another example is the investors who fall over themselves to buy into the kinds of tech firms who never have and never will make money. But the ideas sound futuristic, so now the company is worth billions. But that won’t last either.
What really hurts is that a recession is caused by knock-on effects. So one irresponsible individual can’t pay their rent. But that then means the landlord has £500 less in his pocket. And maybe he was going to buy a new bathroom. And the plumber who would have installed it might now have to cut back on his hobby. And now the company he buys from loses another customer. It’s a chain that goes on and on until virtually everybody is affected.
Some industries may be better protected than others. If you were planning on buying a new car, you’ll probably still buy one when the downturn is over and things are a bit more stable. But it’s the pre-work coffees you bought, the cinema tickets, the things you buy out of routine. You’re not going to go back and buy one for every occasion you missed – that money, for the seller, is gone forever.
This will, inevitably, lead to job losses. And that will flood the market with labour. We have recently seen a sharp rise in the number of job applications we receive. But the laws of supply and demand dictate that even when really good people are out of work, their value (and the pay they can command) is less when there are others with the same skills available.
That is a gloomy outlook. But it’s not all bad. Because economies are cyclical, and good times follow bad. We’ll just have to brace ourselves for now.
What you can do
Be smarter about your costs
To survive a recession, your business will need to be a lean, efficient machine. It’s always a good idea to monitor costs carefully and regularly ask questions of what could be cheaper, and what you could live without. If you’d don’t already, the best time to start is right away. It can be hard to cut costs and cancel services when businesses all around you are struggling, but your organisation is better off frugal than not existing at all.
Build up your reserves
Income is exciting, profit even more so. Money gives you access to so much fun stuff, from big TVs to flashy cars to fancy holidays. It can be difficult to choose savings over buying shiny new things, but doing so shows the kind of discipline that organisations need to make it through difficult times. Become a business that can exist, and even invest, without outside help and the possibilities become so much greater.
Look for new opportunities
Recessions in general, and this coronavirus pandemic in particular, change the way things are. They change our daily lives, they change the way we do business. The smart businesses are those that spot what’s outdated, and what trends are emerging. Change presents opportunity, so monitor your market closely to see what’s out there for you – whether that’s selling new products, offering new services, tapping into new markets or adopting new ways of trading.