Q&A Thursday Episode 8
Q&A Thursday Episode 8
Welcome back to another Q&A Thursday Episode 8 with Orlagh and Jacob. This week the government has announced that the UK has been pushed into the biggest recession since 2009. This comes after the UK saw a record-breaking slump with the economy shrinking by 20.4% between April and June. The government has stated that this is a very difficult and uncertain time for the UK as this is the first time the UK has been in a recession since 2009. Many fear that a recession will trigger mass unemployment despite the governments plans to create jobs in new areas.
What is a recession?
Many do not understand what a recession is or how it may affect you. Recessions are a natural part of the business cycle and occur regularly, however, this recession is more severe than normal.
A recession is a period of economic decline in which trade and spending are low. A recession usually comes after a fall in GDP in two successive quarters. Normally a countries economy grows, people become richer and the value of goods increase. Economic growth is good for most people, there are more jobs and businesses become more profitable. As a result, the government receives more in taxes allowing them to spend more on public services or benefits.
When a country’s economy shrinks and goes into recession all of these things I’ve just mentioned go into reverse. Recessions can occur for many reasons such as debt or a global shock, in this case, the Coronavirus pandemic has triggered this recession.
Why are we in a recession?
Unfortunately, the UK has gone into a worse recession than some other countries due to the coronavirus pandemic. The UK relies on consumer services and face-to-face contact, however, declines in other services including construction and manufacturing has also caused economic struggles. Some say that due to the UK going into lockdown too late, caused an increase in coronavirus cases which then required a longer lockdown. This has had a huge effect on our economy, compared to other countries who acted quicker and therefore restrictions eased sooner than the UK.
The UK has had one of the highest death rates and worst economic impacts, and the government has received a lot of criticism with the delay in action.
How long will this recession last?
The Uk’s previous recession in 2008 caused by the global financial crisis lasted for 5 quarters with the GDP falling by 7.2% in the whole period. The last recession saw a sharp rise in unemployment and national debt almost doubling with major cuts. This recession is a little different from what we saw 11 years ago. Officials predict an increase in spending in the third quarter of 2020, therefore by definition the recession may already be over. However, despite a predicted increase in spending reports have shown a rise in unemployment with 2.7 million out of jobs from April to July.
How will this impact businesses
A recession will impact all businesses, big or small. A lack of spending will lower the demand for all creating fear and uncertainty for businesses. An economic decline may affect smaller businesses in different ways. Those without the largest amounts of capital may struggle and face particular challenges during the recession. However, there are some benefits to a recession for businesses, if the decline is severe enough your competition may be unable to trade. Another benefit is that borrowing rates from the government will remain low, despite loan approvals becoming harder the interest you repay may be minimal.
What can your business do?
There are many different things your business can do to reduce the harshness of the economic decline.
- Reduce and slow down cash outflows such as expenses
- Reduce wasteful and unnecessary spending
- Collect money off customers sooner
- Try to maintain current customers
- Pay payables later, try to work out a deal with suppliers
The severity of recessions are hard to predict therefore having a plan is always beneficial. A recession is usually followed by a period of economic recovery and growth.
Thank you for reading our Q&A Thursday Episode 8. If you have any questions leave them in the comments below or contact us via Info@mustangmarketing.co.uk or on 01925754766.
If you enjoyed Q&A Thursday Episode 8. Don’t Forget to Tune in every week for Q&A Thursday with Jacob and Orlagh.