Richard Whomes, senior director at international business software provider Rocket Software, says tech firms must prepare themselves for recession without delay and he passes on his survival tips

This article is the view of the author and not necessarily of Ready for Brexit

And so, it has begun – the headlines lately are screaming at us:  Global recession a serious danger in 2020! A majority of the ultra-wealthy expect a recession by 2020 and are hunkering down! Hard words to swallow with your morning coffee, but there is no denying it, the threat of a global recession is very real, not least because of the uncertainty that Brexit has caused among businesses. The good news – this is not the UK’s first recession rodeo. Ranging back as far as the Great Slump in the fifteenth century that lasted for sixty years, to the Great Depression in the 1930s, and of course, the Great Recession of 2008/2009, the UK has had its fair share of economic trouble. With this amount of recession experience, it is fair to say that, whatever the weather, we will get over this one too. But we need to be prepared.

Work smart

Although the tech industry is fairly robust, some tech companies are more vulnerable to a recession than others. Take Software as a Service (SaaS) tech businesses, for example.  As there are no tangible assets apart from the technology, and customers can easily cancel their subscription on a whim, a close eye needs to be kept on income to not be caught off guard if clients start cutting back. Companies must be aware that clients will, for example, need to prioritise supplier rationalisation and cost management, rather than tracking employee’s hours or reporting. 

According to prolific investor Sir John Templeton, the four most expensive words in the English language are: “This time, it’s different.” Companies that reduced their costs early on in the recession cycle of 2008 typically emerged from the downturn with a higher EBITDA than those who reduced costs at a later point. For example, in the early stages of the 2008 financial crisis, Costco slimmed its product variety and bought in bulk from fewer suppliers, thereby slashing operating costs and streamlining its supply chain. It was ultimately one of the companies to come out of the recession more successful than it had been before the crash.

It’s about being clever in the way you assess your business in times of economic hardship and the different parts of your IT infrastructure. Prioritise what’s valuable and consider what you can function without in unfortunate circumstances.

Retain staff

During the Great Recession of 2008, employers stopped hiring. By 2011, almost 2.7 million people were looking for work in the UK. However, retaining key staff is essential in keeping morale high and ensuring you’re in the best position when the economy starts to recover. Too often, businesses, faced with a lack of customers, lay off workers and cut back on investment, perpetuating a cycle which drives the economy down further. Employees are the foundation of your business and characteristics including loyalty, commitment and enthusiasm go a long way in a crisis. And don’t forget – the recession will end at some point and severing ties with your best performers might be for good. Tightening purse strings won’t necessarily bring long term sustained stability.

Be in control of the balance sheets

For most, the word ‘recession’ connotes feelings of losing control and unfortunate circumstances determined by global factors. Nevertheless, recession can also present windows of opportunity. During times of economic hardship, owners of other tech enterprises will be looking to restructure and engage in creative business re-combinations. Monitor for mergers and spinoffs.

According to the 2019 Mergers & Acquisitions Report, downturns can be excellent times for deal making. But success requires careful preparation, thorough execution, and, especially, bold decision making. Opportunities arise even in hard times. Resources and labour may be less costly, and during a recession, there will be less competition for startups to cope with. Two of the biggest known startups in recent years came from the backend of the 2008 recession. These are. of course, Airbnb and Uber.

Keep calm and weather it out

So here we are, staring into the eye of the storm, wearing our figurative water-proofs, balance-sheet at hand, standing side-by-side with our employees and customers. Because that is what it’s all about – preparation, awareness, and the people who will see you through. In times of economic turmoil, your employees remain your most important asset, and any lay-offs should be thought about long and hard. With the right team, you can ensure that customers are kept happy, especially during hard times – the support you provide to them during a difficult economic climate will make you even more integral to their business strategy. And don’t forget to keep a keen eye on business opportunities – success can happen in the unlikeliest of scenarios. Recession be damned.

Bibby Financial Services’ quarter three SME Confidence Tracker shows that 54% of UK SMEs were not prepared for Brexit before the October 31 deadline. Anna Tobin reports

The good news is that the latest UK GDP figures from the Office for National Statistics show that the UK economy is not in recession.

The bad news is that annual UK GDP is growing at its slowest rate for almost a decade.

The US/China trade war, combined with the continuing uncertainty surrounding Brexit, has bruised the UK and European economies. It’s time for a reality check. Whatever happens with Brexit, the uncertainty of the past three years has clearly been taking its toll. Is your business recession proof?

Preparing for Brexit and preparing for an economic downturn involve surprisingly similar processes, from a planning perspective. The areas you need to worry about for Brexit, are also relevant when it comes to preparing for recession.

So kill two birds with one stone and use our Brexit checklists to tick off all the things you need to do to protect your existing business and grow new business in new markets. Use our Brexit audit tool to assess how ready your partners are for Brexit and whether it’s time to tweak your supply chain to make it more robust in the face of adversity.

Hopefully, we will swerve away from recession and a No Deal Brexit, but take action now and you will be ready for either. When nobody knows what might happen, contingency planning becomes essential. Your business will be stronger and more dynamic as a result.

Have a good week.

Anna

The latest figures from the Office for National Statistics show the first quarterly estimate of UK GDP from July to September 2019 is growing at its slowest rate since 2010. Anna Tobin reports

The ONS estimates that the UK gross domestic product (GDP) in volume terms increased by 0.3% in Quarter 3 (July to Sept) 2019. Compared with the same quarter a year ago, UK GDP increased by 1.0% in Quarter 3 2019; the slowest rate of quarter-on-year growth since Quarter 1 (Jan to Mar) 2010.

The service and construction industries provided positive contributions to UK GDP growth, but output in the production sector was flat in Quarter 3 2019. Private consumption, Government consumption and net trade contributed positively to GDP growth, but gross capital formation contributed negatively to growth in this quarter. While nominal GDP increased by 0.5% in Quarter 3 2019, down from 0.7% in Quarter 2 (Apr to June) 2019.

Commenting on the GDP figures for Quarter 3, an ONS Statistician said: “GDP grew steadily in the third quarter, mainly thanks to a strong July. Services again led the way with construction also performing well. Manufacturing failed to grow as falls in many industries were offset by car production bouncing back following April shutdowns. Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade. The underlying trade deficit narrowed, mainly due to growing exports of both goods and services.”

The full report can be read here

Emma Salveson, co-founder of Cheshire-based professional training provider The Hub Events on why it is so vital that HR professionals are clued up about Brexit and how it will impact on staffing

This article is the view of the author and not necessarily of Ready for Brexit

The impending fear that the UK may crash out of the EU without a deal is becoming an increasingly realistic conclusion to the last three years of debate and confusion. While 12 months ago many of us were still optimistic that a deal would be agreed, and others were even holding on to the idea that Brexit may not happen, the deadline is now approaching and there will be enormous consequences for businesses across the UK, regardless of whether or not we strike up a deal before November.

The Hub Events provides professional learning and development training courses, and we are currently in the process of relaunching ‘Management in Turbulent Times,’ a course which we originally ran during the economic crisis, but which has become increasingly relevant over the last few months. With this in mind, we wanted to know what state our country’s HR departments were in, and what their biggest concerns are. The answers to our survey were surprising and concerning.

Almost 80% of the survey respondents believe that there will be an impact on their business upon leaving the EU, and 41% of those think that the impact will be ‘significant.’

Almost 60% of respondents think that the impact of Brexit will be negative, and just 7% are anticipating a positive outcome. The remaining 27% feel they don’t have enough clarity or information to predict what the impact will be.

Despite this, only a tiny 9% of respondents said that their company has an HR Plan in place for Brexit. A further 31% said that they are in the process of creating a plan, but an overwhelming 51% admitted that there was nothing in place at all to mitigate the risks of Brexit, regardless of a deal.

It’s a worrying reality that so many businesses don’t have an HR Plan in place to mitigate any damage or confusion that Brexit could cause to their workers’ rights and business systems. From working time and holiday laws, right through to currency fluctuations and access to skilled workers, Brexit could affect every element of a business’s operations – so why are we not more prepared?

While it’s understandable that this requires resources that not everyone can afford, it is important to acknowledge that the fall-out from being totally unprepared will cause serious lasting damage to your systems and employees.

There are resources available, provided by the Government, the CIPD, and here on Ready for Brexit, which give guidance on policy and deadlines in both deal and no deal scenarios. While it’s impossible to know exactly what will happen, the mindset should be to prepare for the worst in order to be in the strongest position possible no matter the outcome. A Brexit HR plan doesn’t require external resources, businesses just need to set time aside for in-depth risk assessment, and HR Departments need to analyse multiple potential outcomes and get mitigation in place for each.

Our research showed that the biggest fears in the HR industry right now are:

• Uncertainty about rights of EU workers in the UK (73%)
• Possible currency fluctuations (58%)
• Changes in access to skilled workers (47%)
• Continuing EU operations with UK employees (38%)
• Changes to fair pay and employee rights policies (31%)
• Changes to working time and holidays policies (31%)

We understand that this is a difficult situation for all businesses, however, help is out there. There is collateral and advice available to help prepare for all these concerns and while there may still be unpredictable outcomes, the best solution is to work with the ones which have already been predicted.

It’s also important to remember that there are silver linings that can be taken from the cloud of Brexit uncertainty. For example, companies can use it as an opportunity to look for potential efficiencies, improve leadership training and development, and reassess their current recruitment and retention practices to see how they can be adjusted and improved.

While this may not be news to many HR professionals out there, it is critical that all businesses have some form of preparation in place for both Brexit scenarios, as a no-deal Brexit is becoming increasingly likely. Whether it’s helping employees to get EU settled status, negotiating rates with suppliers over currency fluctuation fears, or researching any potential changes to employment laws – there are important steps that need to be taken over the next few weeks. Start planning now, and ensure your business is in the best position possible come November.