Can a business truly be recession proof? As we balance on the cliff edge of a predicted long-term downturn, many SMEs will be thinking about circling the wagons to ensure they can stave off an economic onslaught. But will it affect all businesses and are some more protected than others?
Of course, good planning, strong management, and the ability to react to or anticipate market changes are all essential parts of navigating the choppy waters of recession. But does being in the right industry or being able to meet market demand play a part? After all, a canoe salesman won’t do well flogging his wears in the desert. For example, the general consensus is that hospitality is struggling as one of the main commercial victims of the pandemic and lockdowns, swiftly followed by the cost-of-living crisis including the spiraling cost of energy.
However, there are some restaurants and hotels that are defying that perception. And this will be repeated across multiple industries and highlights the determined entrepreneurial grit of many British business owners.
For those looking for some insight and comfort in their decisions, some may look to the past. Whether you agree that analysing numbers and data can help plot a course for the future is a whole other area of debate, but it appears that some tech guys have done just that to try and prove who might be insulated against the economic storm.
According to an internet phone system company, CircleLoop, companies in the health industry are likely to have the best chance to survive the current recession. That conclusion is based on its ‘Recession proof index’, which has been compiled from ONS data from the 2008 recession.
New businesses in the health sector saw the lowest rates of failure, on average, two years after their launch, only 20% went to the wall. This was closely followed by start ups in the Information and Communications industry, which had an average failure rate of 21%.
The research also looked at the best regions to start a business across the UK. Apparently, by 2009, straight after the economy crashed, start ups in the South West and East of England saw the joint-lowest rate of business failures across all regions at just 23%. This was followed by the South East at 24%, suggesting that these regions can be the most recession proof for new businesses.
The South East doesn’t include London, which based on business failure stats from 2009, at 30% was the least recession-proof, equal to Northern Ireland and just ahead of Yorkshire and the Humber.
But can business owners take any comfort in their decisions to choose the industry they are in. When I ran Pimlico Plumbers we survived and thrived through several recessions, but that didn’t mean we were recession proof, we just handled it correctly and nimbly.
Data can be interpreted in lots of different ways, but if this research is useful to anyone in any way, it can remind business owners that they can’t ever be complacent.
We know that entrepreneurs are wired differently and often defy the odds to make a success of their businesses. I certainly hope so, because it’s the nation’s SMEs that time and time again have helped take the country out of recession and back to prosperity.