While nearly 90% of UK consumers are worried about the consequences of a potential global recession and are changing their purchasing behaviour as a result, UK businesses have not taken necessary action to address the likely economic downturn.
According to research, half of UK consumers plan to spend less than they used to and reduce their consumption in the coming year, with eating out to be compromised first as Brits look to cut costs.
The recent study by global strategy consultancy Simon-Kucher & Partners demonstrated that, while some companies have taken steps to advance recession planning, nearly half (41%) have no strategy prepared to respond and just over a quarter (29%) have a partly prepared plan. Just 13% of companies have a complete and fully prepared strategy.
“With the uncertainty of recent years, perhaps the findings aren’t surprising even given how front of mind recession is. Businesses are reluctant to go too far into planning ahead, but companies need to address this and develop a clear strategy if they are going to weather the consequences of the expected recession,” says James Brown, Simon-Kucher & Partners’ UK Managing Partner.
Companies surveyed indicated that their primary concerns relating to the expected recession are maintaining profit margins (45%) and cost savings (44%), followed by customer loyalty (30%), retaining employees in a difficult labour market (27%), and dealing with the cost of raw materials (24%).
Out of those looking to prepare for the recession, 39% of the businesses surveyed mentioned planning price increases, compared to only 5% indicating a planned reduction in prices, with 24% indicating cut personnel costs as possible countermeasure. Nearly half (49%) of corporate decision-makers said their company would survive a recession despite expecting losses, with a small proportion of corporate respondents (7%) anticipating that their business would in fact profit from a recession.
Sentiment amongst UK consumers surveyed shows a high level of concern regarding the expected recession and the subsequent effect on the rising cost of living, with over half (56%) of respondents planning to reduce their overall consumption. The study has shown that, in a response to the recession, consumers would look to primarily reduce their spending relating to eating out at restaurants (71%), followed by adjusted volume of new clothing purchases (66%), cutting down on leisure activities including visits to the cinema and live events (60%), and holidays spending (57%). Over three quarters (77%) of consumers are planning to downgrade to more affordable household food and drink alternatives to save money. “For retailers facing an aggressive reduction in customer spending, some will be trying to identify where they have room to increase prices on everyday products, banking on customers adjusting to these changes. However, with many consumers trying to fix a budget for their weekly groceries we will likely see large scale switching to more affordable alternatives as we move into next year,” says Brown.