The last 18 months have been a particularly turbulent time for UK businesses. Despite expectations to the contrary, our economy is officially still in recession, making this the longest recession on record.
The advice we have given our clients throughout the downturn remains particularly relevant for the road to recovery and focuses on sensible business practices and strong management. Companies survive because they have a sound business model and financial plan. Control of working capital, and in particular cash flow, is essential.
Some insolvency practitioners are forecasting things will get worse before it gets better, with an increase in insolvencies looming for the early part of this year and the distinct possibility of a “W” shape recession/recovery.
Although not advocating a “W” shaped recession, many senior economists recognise that the UK economy has been stabilised, to a degree, by public sector spending and government policies. They conclude that the current level of national debt will necessitate an imminent change in policy, which will undoubtedly have a negative impact on the economy, the labour market and ultimately the speed of recovery.
Support provided by HMRC, via time to pay arrangements and increased personal investment, has helped steady the SME market. Although, with many obvious cost savings already implemented, the options for SMEs are becoming more limited. SMEs provide over 59% of private sector employment (Office for National Statistics/BERR, July 2008), so the ability of the smaller business to adapt and continue to ride out the storm will be essential to the overall recovery of the economy.
Whilst we have seen some sectors starting to improve and more optimism for a number of clients, there is no doubt that many other clients and sectors continue to suffer and will do so for sometime yet. Recovery will be a long process and will continue to place enormous strain on UK businesses.
As we enter a new decade, and with continuing pressure imposed by the recession and recovery, now is an optimum time to review the management of your business and focus on tight management and control.
Over the coming weeks, we will be releasing a number of articles, intended to offer guidance to businesses in terms of housekeeping and planning steps that should be taken to continue to ride the storm.
The subsequent articles will cover these topics: