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The Next Great Depression — Is Your Business Ready?

We are living through extremely uncertain times regarding both public safety and the global economy. Even before the Covid-19 pandemic swept the world, we were teetering on the brink of a recession. Economists such as David Blanchflower compared the pre-Covid financial landscape to that of pre-banking crash 2008. If nothing else, this is a major red flag which should give you the motivation you need to take every possible measure to protect your business.

Is an international recession on the horizon?

At the very beginning of the year, the UN warned that we could be facing a global recession in 2020. That was before taking the impact of Covid-19 into account. Factors including trade wars, currency fluctuations, and Brexit were all amounting to an uncertain global economy and the Unctad report, “global growth will fall from 3% in 2018 to 2.3% this year — its weakest since the 1.7% contraction in 2009”.

Add the impact of Covid-19 to the already precarious situation, and we are now expecting to be hit with a recession rivalling even the magnitude of the Great Depression (and far worse than the 2008 financial crash). As of June this year, the global growth projection for 2020 has fallen to -4.9 per cent (1.9 per cent below the forecast made by the World Economic Outlook (WEO) in April). In addition, the road to recovery doesn’t look like it will be as fast as the WEO initially predicted, and they are now only forecasting a 5.4 per cent global growth for 2021, 6.5 per cent lower than the predictions before Covid-19. Low income households are expected to feel a particular acute financial impact, and global poverty, which has been significantly reduced since the 1990s, is likely to reach another crisis point.

Because of strain on the global economy, we are expected to encounter rising levels of debt in both developing and advanced countries, as well as a “global downturn that could increase unemployment and inequality”, as stated by Kristalina Georgieva of the International Monetary Fund. Redundancies and a decline in job vacancies on an international basis are expected to follow such a crash, with unemployment rates increasing at an alarming rate.

How hard will the UK be hit?

The OECD’s (Organisation for Economic Co-operation and Development) most recent reports do not look promising. Experts have predicted that the UK will likely be the worst hit country in Europe and the economy is forecasted to contract by 11.5 per cent after the first wave of the pandemic. If we end up seeing a second of Covid-19 later in the year, this contraction is predicted to increase to 14 per cent.

One of the major reasons why the UK is likely to feel such a stark economic impact is our country’s reliance on the service industry for our economic growth, a sector which has been particularly damaged by the repercussions of Covid-19.

In addition to the economic factors surrounding Covid-19, the US trade war with China has caused a larger drag on global growth than anticipated, and the UK will be on the receiving end of the economic repercussions. What’s more, the looming prospect of Brexit poses different threats to the UK’s economy. At best, the uncertainty caused by both Brexit and the Covid-19 pandemic has created a hesitant consumer base in the UK. Customers are spending less and are more cautious of businesses than ever. It is a difficult time to maintain customer loyalty, as would-be consumers are tightening their purses in the fear of a looming financial disaster.

Learn how to protect your business

Times may be challenging, but if you think ahead, you’ll be able to safeguard your business against a recession. Businesses that prepare for every eventuality are the ones that not only survive but thrive in the face of adversity. Leaving it too late to implement a recession strategy could be your undoing, so get ahead of the game and prepare for a period of great financial difficulty. Here are some key strategies that will help your business face economic uncertainty:

No one knows quite what to expect over the coming months and years, but now is the time to start safeguarding your business against an imminent recession. The road ahead does not look easy, but if you put certain measures in place and react in a timely manner, there’s still time to recession-proof your business and come out on top.