• Is The UK Facing Another Recession?

    Does the recent yield curve inversion in UK bonds point to an approaching UK recession?Is the UK approaching another recession? Yesterday evening I saw an article on Sky News suggesting that shares had slumped on bond market signals that had not been seen since the last financial crisis.

    The article reported that in the US, such inversions have preceded the last 9 recessions dating back to 1955.

    I also saw this graphic representation (from the BBC) of the link between yield curve inversion and recession. Whilst I am not an economist, these seem like troubling developments.

    Yield Curve Inversion

    The phenomenon, that has been in the press over the last 24 hours, is known as a "yield curve inversion", where the returns yielded by 10 year UK bonds (parcels of Government debt repaid after a set time), fell below 2 year bond yields, for the first time since 2008. This situation was reportedly mirrored in US bonds. The "inversion" means that investors are demanding bigger demands to invest short term, than long term - the article explained that this was an indicator that these investors have lost faith in the economy.

    UK Recession?

    Is the UK going to enter recession? Well projected growth rates are already very slim, so it would take little to push the economy into, at least a technical recession (2 consecutive quarters of reductions in GDP). With the uncertainty of Brexit and the ongoing threat of a global trade war, there are plenty of issues in play that could affect GDP negatively. The added worry was expressed in my recent post about how the UK may have exhausted its recession fighting tools.

    Protect Your Business Against Recession

    A better question is perhaps what can you do to protect your business from a recession, if there should be one?

    Well below are 8 simple recession proofing measures to help protect your business against the effects of a recession:

    1. Improving your working capital position and improve your cash flow - to maximise your resilience to any slowdown.

    2. Review your business finance contingencies and get any funding in place before it becomes critical - also review the strength of any existing invoice funder. If your funder were to fail, as some have recently, you could end up having to search around for a new provider which could impact your cash position.

    3. Consider taking protection against bad debts - to counter potential customer failures by mitigating their impact.

    4. Spreading your customer base to avoid reliance upon one or more prime debtors - see our 5 tips if you only have 1 customer.  This post will give you some ideas about the urgency of trying to expand your customer base, and access to support that we can arrange to help you recruit additional customers. 

    5. Taking action early if you are facing insolvency - this could include corporate rescue if you act early enough.

    6. Manage your expenditure to minimise outgoings.

    7. Review your stock holding and purchasing procedures to minimse exposure should sales fall, and to minimise purchasing costs.

    8. Maximise cash collections from debtors with efficient credit control.

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