By the end of 2022, economists predict that the UK economy will be in recession.
A recession is defined as two consecutive quarters of negative growth, and the ONS has already concluded that the second quarter of 2022 ticked that box. Just one more quarter of downturn and a recession will be confirmed.
On the continent, the picture is not much brighter. While Barclays forecasts a eurozone recession in the last quarter of this year lasting until the middle of 2023 at the earliest, some countries are faring worse than others.
Those countries struggling more than their neighbours are doing so because they are heavily reliant on natural gas exported from Russia.
Take Germany, for example: until Moscow’s fumbling invasion of Ukraine, it was – by far and away – the largest importer of natural gas from Putin. It is also experiencing the lowest level of growth of any EU member state. In second place for importing Russian gas is Italy, experiencing the second-lowest level of growth.
The list goes on:
Natural gas imported from Russia (measured in cubic metres):
- Germany = 52,463
- Italy = 28,716
- France = 7,780
- Spain = 3,387
- Germany (-2.3%)
- Italy (-2.1%)
- France (-1.2%)
- Spain (-1.6%)
A period of recession is undoubtedly worrying. After all, everything becomes more expensive following a devaluation of the money in our back pocket, unemployment shoots up, and businesses struggle.
But it is only when periods of worrying downturn are on the horizon that many businesses finally undertake a granular assessment of their costs, their processes and their products or services.
Until that point, the attitude might be one of complacency.
“We’ve always done it that way. If it isn’t broken, don’t fix it.”
But when your profits drop, your margins are squeezed, and you’re faced with the prospect of administration, that is the time to make your business leaner, more resilient and more competitive.
It is easy, when you are in that position, as a key decision-maker, to undertake knee-jerk reactive action – such as large-scale staff redundancies.
You should resist.
Instead, focus on what your business does well and find ways that you can do it even better. You shouldn’t chase innovation for the sake of it, but you should identify opportunities to change for the better.
A recession is a catalyst for change.
But you should change only when it will tangibly improve your company, whether competitively or in terms of efficiency.
Speaking to Business Leader Magazine, Maureen Corish, Managing Director of Pumpkin PR said:
“Being lean doesn’t mean being sub-standard. Your team needs a leader who explains what is happening now and a roadmap to navigate it. But also someone who can paint a vision for the future.”
There may also be the temptation to cut back on marketing. That, too, should be resisted. After all, in the 2008 recession, businesses that increased their marketing budgets outperformed those that cut back significantly.
Because their competitors cut back on their advertising budgets. Marketing messages became more effective because there were fewer of them crowding the market.
It became easier for those messages to cut through the noise.
When the recession ends, it is much harder for a company to advance its position because the marketing messaging of your competitors is more abundant.
If you’re still sceptical, you should know that some of the world’s biggest businesses were founded during a period of recession. That statement is true for almost half of all Fortune 500 companies:
- FedEx (oil crisis of 1973)
- Hewlett Packard (Great Depression, 1935)
- LinkedIn (post-dot-com bubble, 2002)
- Airbnb (Financial crisis, 2008)
We have included companies with roots in the 20th century because not only were they founded during times of economic downturn; they have successfully navigated subsequent recessions.
News of a looming recession shouldn’t cause you to shut up shop or bury your head in the sand and hope that everything works out. Instead, take stock of what you do well, innovate where possible and suitable to do so, shout about it through your marketing messaging, and remember that all successful companies face periods of recession.
A recession is your wake-up call. Don’t snooze your alarm.