Though it was predicted that the UK would fall into a prolonged recession by the close of 2022, according to the National Institute of Economics and Social Research the UK may avoid falling into what is classed as a “technical recession” [1]. However, with GDP growth close to zero and the Bank of England not predicting the UK's true recovery until sometime in 2024 [2], the impact of this stalled growth will be affecting all businesses across the UK making it feel like we are in a recession.
SMEs across the UK are anxious about this new uncertainty with over 40% of small business owners recognising the recession as their top concern for 2023 and a quarter expecting their turnover to shrink in the next year, according to an SME Outlook 2023 report [3]. And a recent survey revealed nearly 50% are set to lift their prices to offset increased costs, and almost a third have put on hold plans to grow [4].
With labour shortages, rising interest rates, war on the doorstep of Europe and the resultant energy crises adding to SMEs anxieties, these pains are not likely to disappear anytime soon and not planning for future growth can be expediting pressures. Therefore businesses, especially SMEs, need to start forward thinking for both the short- and long-term to come out the other side fighting. There are several ways in which SMEs can stay ahead and stay positive.
Plan for the long-term
With slow growth looking to last until at least the beginning of 2024, it is pertinent to plan for the long term and decide how the business is going to weather the storm.
Decision-makers need to determine what is right for their own circumstances, but this doesn’t mean that they should overlook opportunities. Economic turbulence is part and parcel of a business’s life and those businesses that tackle the issues they face head on are going to thrive compared with those that bury their heads.
The macro-economic environment will improve and therefore a knee jerk reaction to cut costs is not always going to be best. Often a business can take advantage and increase the talent pool across the business and take advantage of competitors who are downsizing.
For those looking for investment, MDs and FDs approaching lenders will need to present detailed and well-thought-out strategies, with comprehensive business plans and financial forecasts to support a realistic long-term strategy.
Consider alternative lenders
Many successful businesses were built up from the opportunities presented during uncertain times; investing and growing while others procrastinated and retreated. Yet with traditional lenders increasingly becoming risk-averse and contracting their business offerings, where can forward-thinking businesses looking for investment turn?
Even during difficult economic times, alternative debt providers, such as Frontier Development Capital (FDC), can offer SMEs a solution to support business development. They can take a holistic view of a business and its strategy and can provide flexible and tailored investments that fit with the medium- to long-term plans of the business. This means that SMEs need not shy away from making decisions that will impact growth as a result of funding restraints but instead embrace the possibilities of the alternative investment landscape to find the option that works best for the business.
Prioritise retaining current customers
Retaining current customers is just as, if not more, important than gaining new customers, particularly at times like these. Existing customers are likely to be more loyal, especially if they have received good quality service and are therefore likely to come back and even be advocates of a business. If your existing relationships can see that you continue to deliver a quality service, even during uncertain times, they are more likely to trust your expertise.
It is also worth noting that it is almost certainly cheaper for businesses to market to their existing customers rather than target new ones. The payback is also more likely to be quicker, with the economic uncertainty slowing decision making and creating customer inertia.
Even though SMEs should focus on retaining current customers, that doesn’t mean they should give up marketing to potential new customers. There are many ways in which companies can market to potential customers that won’t break the bank. Social media platforms are a great way to market businesses and promote brand awareness, making potential customers aware of the products and services that that business has to offer.
It is understandable why the state of the current economy may be unsettling for businesses and individuals right now; however, this will not stop the more forward-thinking from unlocking growth potential.
Alternative leaders such as FDC can help support businesses with a range of alternative funding options. FDC is a prime direct debt lender, offering investments up to £20m to support established mid-market SMEs, manufacturers, and property developers in the UK, even during stormy times.
To find out more about how FDC can support your business, download our SME Debt Funding Pack, or talk to an Investment Director.
[2] https://hrnews.co.uk/recession-is-small-businesses-main-concern/
[3] https://www.businessleader.co.uk/70-sme-owners-say-rising-costs-biggest-challenge-year-survey-finds/
[4] https://www.funds-europe.com/investment/uk-smes-substantial-challenges-2023