It’s obvious to everyone now that we’re heading into recession. Energy and fuel costs spiralling and food prices rising are going to affect everyone on a personal level, but they could also have a knock-on effect on your business. Are you in a position to get through this?
What’s Happening to the Economy?
A number of factors have combined to create shortages (and therefore rising prices) across the world, but some are specific to the UK. Both Covid and post-Brexit issues (in particular, the lack of HGV drivers available) created a situation in which we were badly placed to get out of any further difficulties.
When these came, of course, they started with the energy crisis. Low stocks and increased worldwide demand for gas, in particular, have seen multiple energy companies going out of business. The Ukrainian war and resulting cutting of ties with Russia has increased these problems, as well as boosting shortages of both petrol and food.
The prospects don’t look hopeful, with the war likely to drag on. Even afterwards, it will take some time for Ukraine’s food production, among the most important in the world, to recover, while most developed countries are struggling to find alternatives to gas and fuel supplies from Russia. This is unlikely to be a short recession.
What Are the Prospects for the Rest of 2022?
The Resolution Foundation think tank has predicted that the cost of living could rise by up to 10% by autumn. Besides squeezing family budgets, high inflation will increase the debt repayments the government has to make, reducing their manoeuvring space to help.
The effects of the war in Ukraine are also likely to cause a drop in the UK’s GDP, and this is likely to lead us into recession. As a small business owner, you may feel the pinch yourself, but almost inevitably many of your customers will be struggling to pay you. They’ll either cancel their business with you, or else default on their invoice payments — and either way, that will hit your income.
What Can You Do to Survive the Recession?
We can hope that the government will act to reduce the impact of the current economic crisis, but the reality is that the rest of this year, at the very least, is going to be difficult. As a business owner, your best approach would be make sure all your systems are running at peak efficiency, to make the most of whatever opportunities are available.
This includes your credit control — but that doesn’t always mean going after debtors in a heavy-handed way. If they’re genuinely struggling to pay, as opposed to choosing not to, you’re most likely to get results by negotiating an arrangement under which they pay off as much of their debt as they can, as quickly as possible.
This can require skilled negotiations, though. Give me a call to find out how I can help you get through the recession.