SME’s wonder if there is going to be a recession in 2020
Research shows that almost 50% of UK businesses are expecting harder times in 2020. A study was conducted on businesses of varied sizes, with 250 executives, who believed that the UK economy is going to contract in the coming year. Brexit and the eco-political uncertainty it has stirred was most commonly cited as the expected cause. Yet, this is all opinion, is there really going to be a recession in 2020?
Has Brexit restricted consumer spending?
Brexit uncertainties meant that consumers were holding onto their money. In the summer of last year, the British Retail Consortium said that clarity and more information was required about Brexit because consumers were reluctant to part with their cash whilst the confusion was ongoing. However, reports are comparing 2019 to 2018 and using this as the yardstick with which to predict a recession. In the UK, the summer of 2018 was a record-breaking year for sales across so many markets induced by the world cup frenzy and seems an unfair benchmark to use.
This kind of low consumer spending can be good for the individual. Most people are trying to build up a financial cushion to deal with uncertainty or unexpected changes in their lives in the year to come. This could reduce the number of people who reach out in need of same day loans, which is a kind of high cost emergency credit. However, it could be the reason the UK economy shrank in the months leading up to Christmas.
How much has the UK economy fluctuated recently?
Reports show that the UK economy shrank 0.3% in the quarter leading up to November. However, the biggest industries in terms of contribution to the economy still grew in the same time period. This does suggest that some businesses could be impacted, but not all.
Yet, the formality of Brexit was officially passed on 31 January 2020. Now that it cannot be pushed back yet again, it is predicted to have provided a degree of certainty amongst consumers. Hopefully, this means consumers won’t be so tightfisted with their money whilst still being financially conscious, and growth can continue across all sectors in a steady and stable way.
What about jobs and employment?
Despite a slowed rate of growth, there are 200,000 new, full time jobs generated in the same three months leading up to November. This means that employment rates are thriving at an incredible 76.3% for women. Full time, stable employment is a good indicator that companies are not expecting a downturn.
Furthermore, and in complete contrast to the 50% of business executives that expect the UK will experience a downturn, news from the IMF (international monetary fund) suggests that businesses should expect an upturn in investment. Even as Brexit trade deals are still being worked out, experts for the IMF believe that the UK will become a uniquely attractively place to invest in the coming years. This is supported by the fact that UK technology start ups are thriving due to foreign investments and are still expanding, out-performing those in Europe.