Figures released in mid-December reveal the size of the UK economy shrank more than expected in October as the manufacturing and construction sectors were hit by poor weather.
Gross domestic product (GDP) is thought to have fallen 0.3% during the month, down from 0.2% growth in September, the Office for National Statistics (ONS) said.
It came as all three of the main sectors that the ONS tracks fell into negative territory for the first time since July. Economists had expected GDP to contract by just 0.1%. What’s more the UK’s battle with persistent inflation is far from over and this is acting as a drag on the economy.
As a founder who has traded through three financial crises, I know from experience an economic slowdown will present a range of challenges that will need to be managed, but it can also present opportunities to strengthen your business.
Both Microsoft and Apple were launched during recessions and the good news is if you survive through tough times, you are more likely to be in an optimal position ready to take advantage of the recovery when it starts.
When it comes to finance, one of the key lessons I have learned is the importance of raising funding early. As the economy slows, raising money will become more challenging, so don’t wait six or nine months: if you think you will need cash in the second half of 2024 or even 2025, start looking now. Especially as we head towards the end of the tax year, if you are running an EIS-approved business, raising funding can sometimes be easier in the months leading up to that deadline of 5 April.
Established businesses should also take a close look at improving efficiency and reducing costs. This doesn’t mean you should start laying people off and sacking suppliers. It means taking a close look at the ways you do things, and asking if they can be improved.
Often subscriptions to services and software licenses automatically renew. So check the dates and give notice in plenty of time for any you no longer need. For those you keep, ask for a better deal for renewing, or even extending the contract.
Marketing is one area where companies often look to save money when budgets are tight. But I’ve found that you can often secure more competitive ad rates during a slowdown meaning you can acquire new customers more cheaply. And if your competitors stop advertising, there’s a good chance your ads will be more visible and therefore more effective.
And don’t always, agree to pay the page rate for an ad. Especially with digital advertising, see if you can negotiate a deal based on conversions and leads. It will help you identify which media partners are the right ones for you and if your ads are generating opportunities, you’ll be happy to pay for the leads.
I’ve also found that a downturn is also a great time to launch new products. This could be a stripped-down version of an existing product at a lower price or a complementary product that allows you to up-sell to a customer.
Remember competitors in your market are also likely to be facing similar challenges to you. I’ve found that these pressures can lead to opportunities to acquire struggling rivals. But proceed with caution and be sure the business case is sound and that the process of doing the deal doesn’t distract you from your core priority of ensuring your existing business continues to trade successfully.
Whilst different sectors will be affected differently in the months ahead, the key objective of all founders must be to continue to trade through the tough times. For some, the next 12 months will be filled with opportunity; for others it’s going to be rough. But by planning ahead and preparing, the good news is that you can come out the other side a better-run, more efficient business ready to take advantage when the economy moves back up though the gears.