Fears of a recession loom large throughout the nation, but do businesses across the UK have contingency plans in place?
Online accountancy firm Accountant Online surveyed 145 businesses throughout the UK & Ireland and asked them
“What is the first cost you would cut if there was a significant downturn in the economy?”
“Marketing & Advertising can be seen as a luxury for a lot of businesses – In the short term it can significantly impact your cash flow and can take a long time to take effect, so these numbers aren’t surprising” notes Larissa Feeney, CEO of Accountant Online, a business born out of the last recession and which now boasts a 2’500 strong client list
“Traditional advertising channels like newspapers, radio features, television spots and paid online ads can be viewed as an unnecessary expense in certain fields. This form of advertising spend that is not directly linked to the sale of a product is usually cut as it doesn’t lead to short term decline in revenue. Businesses also think they may be able to pick up their campaigns again in future quarters when confidence has returned . For some businesses however, it is an opportunity to invest more in advertising spend, if they have the cashflow available, if they can see immediate return.”
Tech giants Meta, Stripe and Twitter have all laid off staff en masse recently – With 21% of businesses surveyed noting that they would cut staff & wages first, should there be a wider cause for concern?
The Situation Explained –“These tech businesses have forecasted growth and if your lead time for conversion is quite long then you tend to over hire in the short term as you’ll need to have staff in place, get them trained up and engaging in the process as it takes months to convert these B2B sales. They’ve forecasted growth for 2023 that they know now isn’t going to happen, so they’ve had to reduce their workforce.”
Where does that leave regular SMEs?
“It’s slightly different as SMEs do forecast but, they do not over hire in the short term as they don’t have the funds. Instead, they will wait for business to increase to such an extent that additional hires are necessary, but they will cut on overheads, usually staff & wages. The cost of sales will never suffer, apart from the business trying to negotiate the best price, however if something does not relate directly to a sale it is open to be cut – Admin staff, IT Support, Accountancy, Sales & Marketing, these can all be outsourced so are vulnerable. In our survey you see supply chain and inventory the lowest at 8% because that is the only one that is directly related to sales.”
