Published Tuesday 27th August
For much of the last few years, British businesses have been competing against external market pressures. Since the EU Referendum in 2016, domestic economic growth has slowed, business investment has waned, and consumer confidence has deviated. Pound sterling’s value has also dropped, although this has worked in favour of some industries.
Despite these circumstances, many British businesses have managed to create success. However, recent developments further afield could make that increasingly difficult. A string of disappointing financial results in the world’s biggest economies has left many fearing a global recession and the first significant decline since the financial crash of 2008.
The Global Economic Picture
In reality, fears of a global economic slowdown have been apparent since early this year. Back then, the primary concern was regarding China. Domestically, the world’s second-largest economy was experiencing a slowdown which saw a sharp decline in demand for exports. This consumer shift affected many major brands, most notably Apple. Earlier this year also saw developments in the much-publicised trade war between China and the United States, which is still taking place.
As the trade war began, the USA found itself in a robust economic position domestically, perhaps fueling its ambitions to challenge. However, as the situation has dragged, their domestic economy now appears less secure. In the last quarter, American GDP slowed from 3.1% to 2.1%, primarily impacted by continuing trade tariffs. Meanwhile, an inverted yield curve in the US bonds market earlier this month, a renowned forecaster of economic downturns, sparked a genuine global concern.
Events on the other side of the world are also creating significant worries closer to the UK. The Bundesbank, the central bank of Germany, has announced that it expects a domestic recession to materialise this autumn. Their warning follows a summer of declining exports, mainly due to shrinking markets in China and the US.
These are three substantial global concerns, but there are many more besides. The financial stability of Brazil and Argentina is uncertain; domestic politics in Italy has left confidence low, whilst Singapore is also heading into a recession. These local scenarios are combining to highlight the stark nature of the global economy – analysts believe we could be heading towards the worst economic period since the financial crash.
Brexit Contributing to UK Business Concerns
The UK is not exempt from this global trend. Between April and June, UK GDP contracted by 0.2%, the first quarterly fall in over six years. Unsurprisingly, Brexit is seen as the defining factor for the national economy.
With Boris Johnson signalling to businesses his desire to leave on 31st October, the prospect of a ‘no-deal’ Brexit is becoming increasingly real. Industries affected by earlier proceedings, such as the automotive sector, are now seeing worse effects as a result. Still, if a hard Brexit does come to fruition, the whole impact on the UK business landscape could be much greater than experienced up to now.
Preparing UK Companies for Future Economic Concerns
There are some bright lights to be found through the UK economic fog. Consumer confidence has rebounded after a decline in late 2018, perhaps aided by the strongest employment figures in over 40 years. However, the reality is that very few industries should expect to see substantial growth in late 2019 and early 2020.
In these turbulent economic times, companies must do all they can to secure their foundations through the next 12 months. Cost reduction consultants like Expense Reduction Analysts can help to ensure your business is streamlined and secure for any downturn in results. We’ve been working with major UK companies in a range of industries throughout the Brexit process, helping to refine supply chains and reduce overheads.
Our specialists have saved millions of pounds in a range of cost areas, from distribution and logistics to energy and utilities. If you are interested in what savings we could create for your business, why not browse our case studies or get in contact with the team today?