The UK’s cost of living crisis is wreaking havoc on individuals’ lifestyles and living standards across the country and this is rightly getting a lot of media coverage. Add to that, the continued political cross-border threats from the conflict in Ukraine and wider ramifications from Brexit mean economic risks are widespread. Of course, the worrying issue for many businesses is how this crisis has a knock-on effect.
When normal people struggle to find the money to pay bills and stay on top of their finances, there is less money to go around for goods and services. This means that businesses find it harder to attract customers.
Ultimately, this is what takes countries into recession – and recession or the threat of a recession can be a very worrying time for businesses. As it stands the UK is not currently in recession, but given how volatile almost all aspects of life have been in recent months, there’s no guarantee that you’ll even get to the end of this article before that changes!
But as economic challenges loom closer, businesses do need to think carefully about how they might spend their money if the country does find itself in recession.
Should businesses spend money in a recession?
Logic dictates that if the country is in recession, businesses should find a way to reduce their spending as much as possible. Doing so is logically prudent – difficult financial situations call for tightening the belt and ensuring the company runs as cheaply as possible, right? Well, of course, it is difficult to argue with any argument that calls for lowering your business’ outgoings. But there may be another way to think about this, and in fact, it is arguable that if your business does have money to spend during a recession, it could actually be very effective.
Challenging times also tend to call for businesses to consider:
- adaptive investment goals
- revised payment methods and structured plans, and
- diverse or inventive investment strategies.
Yes, a recession is bad news financially, but it doesn’t mean that no-one has any money to spend or that businesses can’t thrive. If all of your competitors are feeling the pinch, this could be an ideal time to capitalise and invest in your company to improve its position in the market and build out your brand.
Here, we’ll look at some of the ways businesses can consider spending money during a recession to make the best of this difficult financial time.
Retain high-performing staff
Some businesses make the mistake of allowing expensive staff to move on during difficult financial times. It is assumed that expensive staff are too much of a financial burden, and the money would be better saved or used elsewhere. But losing key staff is a real problem, and it is one that you should avoid.
Indeed, in difficult times you should be doing everything you can to keep hold of your best employees. These are the people that you need to have you navigate the period and come out to the other side in the best possible position.
Maximise your R&D tax credits
One of the best ways that your business can spend money during a recession is to invest in research and development. R&D can be an extremely effective way for a company to gain a competitive advantage in a way that is subsidised by the government.
For any R&D work relating to science or technology, companies can claim back R&D tax credit – as long as the research and your business conform to a number of requirements.
However, it is also important to note the changing regulations around R&D tax credits that are being brought in to attempt to deter abuse of the systems. Getting this right is essential, as it could undo all the good work if you get it wrong.
“Claims for relief will have to be made digitally and more detail will be required within the claim,” explains Hamlyns Chartered Accountants, “Each claim will need to be endorsed by a named senior officer of the company and companies will need to inform HMRC, in advance, that they plan to make a claim. Claims will also need to include details of any agent who has advised the company on compiling the claim.”
Invest in SEO and digital marketing efforts
Another important thing to consider during a recession is marketing efforts. Interestingly, it can actually be worth putting your money into long-term strategies such as brand building and search engine optimisation (SEO) rather than the kind of marketing results that yields instant but short-term results (like internet ads).
The logic here is that you are putting money into forms of marketing that will pay off when the country is able to come out of recession and grow again. In that sense, you are doing the groundwork for later success.
Plan for a prosperous future
Realistically speaking, you have to remember that the recession will not last forever. Yes, cutting costs can be an important part of financial survival – but cut too deep and you will lose the core of the business that has allowed you to be successful.
Ultimately, then you need to prepare for the worst, but don’t assume that this means you can cut all of your costs without seeing a significant downturn in the products and services that you provide.