A Cumbrian accountant has issued a plan now plea to businesses across the county as the UK’s economy grapples with the challenges of curtailed consumer spending and the cost of living crisis.
Although the country is some way from an official recession being declared, Paul Hornby, the managing director of JF Hornby & Co is urging business owners to be nimble and savvy.
He is warning of 12 months ahead that could prove to be more challenging than the period during which the UK was placed in lockdown due to COVID-19.
It comes as the UK’s Consumer Confidence Index dropped one point to minus 41 in June, setting a new record low for a second successive month.
And new data from the Office for National Statistics has revealed household incomes fell for a record fourth successive quarter, as finances failed to keep up with soaring inflation.
Paul said: “We’re heading into the eye of a storm. The fragilities of the economy are already becoming painfully apparent and a consumer-led recession is a distinct possibility.
“Inflation is sky-high because of supply chain issues and we are also dealing with a cost of living crisis being amplified by interest rate hikes to curb inflation.
“That means businesses and individuals are facing a higher rate of borrowing, and tough decisions are now being made in relation to spending. A night out or buying lunch during the day are no longer taken for granted. A shift in buying habits will hurt the high street for sure.
“We experienced a shrinkage in the economy across March and April, representing the first back-to-back monthly drop in GDP since early 2020. I can’t imagine the figures for May will show any uplift and the impact of the Jubilee weekend in June is also likely to impact data for the month.
“When we were forced into lockdown during COVID-19, a package of government support was very quickly rolled out and that proved to be the difference between survival or bankruptcy for many businesses.
“There will not be a repeat of that unprecedented level of support, so I am urging business owners to review their resilience plans and be clear about how they plan to weather the storm. We’re in for a bumpy ride and it’s time to buckle up.”
Experts are now pencilling in a fall in gross domestic product (GDP) overall between April and June of around 0.5 per cent or more
With the economy having now shrunk in both March and April – by 0.1 per cent and 0.3 per cent respectively – there are renewed worries over a sharp slowdown as the cost-of-living crisis appears to have halted the post-pandemic bounce back.
Economists believe a technical recession – as defined by two successive quarters of falling GDP – may yet be avoided, but there is no doubt that the economic outlook has worsened in recent months.
The Organisation for Economic Co-operation and Development (OECD) recently warned the UK economy will grow more slowly than first thought in 2022, and grind to a halt next year as the Ukraine war impacts economies worldwide.
Chancellor Rishi Sunak has insisted slowing growth and soaring inflation is a global problem.
The falls in GDP over March and April mean that the economy is now 0.4 per cent below its January 2022 peak as the recovery has gone into reverse, though there are bright spots in April’s growth data.
It shows that GDP still stands 0.9 per cent higher than before the pandemic struck and that, without the impact of the phasing out of the Government’s test and trace programme and lower vaccine activity, the economy would have grown by 0.1 per cent.
