How To Survive As A Business In A Shrinking Economy

The UK is not in a recession – at least, according to recent figures indicating the UK’s close call with recession conditions. A difficult year in 2022, punctuated by steep rises in the cost of energy and wholesale goods – and counterintuitive government measures that spiked inflation yet further, precipitated a period of real concern for the private sector, and a recession was all-but guaranteed.

While the ship has steered somewhat away from recession, there is little light on the horizon for businesses. Inflation has not decreased as expected by the Bank of England, and spending remains precipitously low amongst UK consumers with dwindling household budgets. The market is not a viable one for businesses that are not primed to survive a difficult economic landscape. With start-ups feeling the heat more than ever, what are some of the key tips to surviving a shrinking economy?

Strengthening Relationships

The relationships you foster as a business are all but essential to your survival in the long term. These relationships are wide-ranging, from the symbiotic interrelationship between businesses in the same corner of the industry to supply chains and even the relationship between business and customer.

Indeed, the latter relationship is a core relationship to solidify when heading into dark economic times. Your core repeat customers provide the profits with which essential operations are afforded, and the more you can consolidate the loyalty of these core customers, the better you can ensure continuing operations.

Operational Weight and Decision-Making

In a recession, it is vital to re-evaluate any and all expenditures made by your business – if only to identify clear candidates for ‘dead weight’ that can make short-term savings and improve cash flow. Seeking input for an audit of your internal processes might also reveal inefficiencies and candidate restructuring, which brings us to the importance of decision-making.

Tough times call for tough decisions. The quicker you can make those decisions, the more agile your business will be. Immediate response to new information or recommendations means you can swerve unnecessary obstacles, financial or otherwise, giving your core business a much better chance of survival. Most businesses are not altogether close to collapse, but pivoting with speed as opposed to haste can only be a good thing.

Risk and Reward

Finally, it must be addressed that shrinking economies usually inspire businesses to address risk – and to become more conservative with their decision-making. But the risk is not a wholly bad thing and can be used to your advantage for medium-term gains and longevity.

The most obvious example here would be the movements of the stock market. In times of recession, stocks lose their value but are guaranteed to gain them back over time. Spending on stocks, shares, and assets might be reckless in the short term, when considering cash flow, but can pay dividends as the economy returns.

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