What SMEs can do in the event of a recession


While the end of 2023 saw inflation slow down, experts have warned that the chances of a recession in the coming months are more likely.

A recession, which is usually triggered by an economic decline across two consecutive quarters or more, was last seen in the UK in 2020 during the Covid-19 pandemic.

The risk of a recession has been amplified by the revelation that there was zero growth in the economy between April and June 2023, followed by a shrinkage between July and September.

A recession can be a challenging time for business owners, especially those of small and medium-sized enterprises (SMEs).

However, with the right strategies and a proactive approach, businesses can not only survive but also thrive during economic downturns.

Understanding the impact of a recession

A recession typically leads to reduced consumer spending, tighter credit conditions, and a general slowdown in economic activity.

For SMEs, this can mean decreased sales, cash flow challenges, and difficulties in securing financing. With this in mind, understanding how a recession could impact the industry your business operates in is key.

Cash flow management

Cash flow is the lifeblood of any business, especially during a recession.

Prioritise managing your cash flow by:

Diversifying revenue streams

Relying on a single or limited number of revenue streams can be risky during a recession.

Consider diversifying by:

Maintaining strong customer relationships

Your existing customer base is a valuable asset. Maintain strong relationships by:

Strategic marketing

Effective marketing is crucial, even during a recession. Focus on:

Managing staff effectively

Your employees are key to your business’s success. To manage staff effectively:

While the Government’s current course of action has avoided a recession, there is no guarantee that this will be the case in the future.

SMEs should be wary of this and plan accordingly to safeguard the financial wellbeing of their business.

If you are worried about a recession or would like any assistance with managing your business’ finances, our expert team of accountants are here to help you. Contact us today.