Recession Fears Confirmed For Business By Latest ONS Data

Latest data from the Office for National Statistics shows the first GDP estimate for the fourth quarter of 2023 with a contraction in GDP for the final quarter of 2023 which means the UK economy is in technical recession.

Responding to Office for National Statistics figures showing that GDP fell by 0.3% in the final quarter of 2023, following a fall of 0.1% in the third quarter, Martin McTague, National Chair of the Federation of Small Businesses (FSB), said: “The news that we’re in a recession will just confirm what many small firms have been saying for some time now – it’s very tough out there. Our research found that confidence among small firms has been in negative territory for seven straight quarters, due to the energy price crisis and the knock-on impact on the cost of doing business."

“There are big differences between sectors, with the hospitality sector recording by far the gloomiest confidence score, underlining that economic pain and strain are far from equally spread out," he continues.

“Small firms are grappling with high interest rates, energy costs much greater than they were a couple of years ago, and weak consumer demand. Two in five small firms said their revenues decreased over the final quarter of last year, with only a third saying they increased, showing that the shine has definitely come off the so-called ‘golden quarter’, to small firms’ detriment."

“The Government needs to foster an environment where small firms can grow, to the overall benefit of the economy, and to put this period of stagnation and shrinkage behind us once and for all. We have set out an ambitious but achievable programme for small business growth at the forthcoming Budget."

"Small firms have the drive and the potential to get the economy back up and running, and to put this period of economic decline firmly behind us.”

“Uprating the Employment Allowance to keep it in line with recent raises in the National Living Wage, raising the VAT threshold from £85,000 to at least £100,000, bringing back tax-free shopping for overseas visitors, ensuring the future of the Recovery Loan Scheme to get funds to start-up and scale-up businesses, and bringing in a national Business Energy Advice Service to help small firms with eye-watering energy costs would all provide a launchpad for growth," concludes Martin.

Dr Liz Cameron CBE, Chief Executive of the Scottish Chambers of Commerce, said:

“A contraction in GDP for the final quarter of 2023 means the UK economy is in technical recession. Businesses were already clear about the challenges that they face, and this news should ring alarm bells for Government."

“While this recessionary data is slight, it confirms what our own business research had been saying for all of 2023. That the economy remained persistently locked in a low growth cycle of stagnation as headwinds continued to weigh heavily on firms."

“The Chancellor must use the upcoming Spring Budget in just a few weeks to set out his government’s plans to help business and the economy to grow."

“Businesses need long-term certainty through an economic plan that relieves their cost pressures and helps unlock much needed investment," concludes Liz.

Margot Faraci, global leadership expert and prominent senior leader with over two decades of experience in the corporate world and high pressure environments adds: “The long-term trend is undeniable: the UK has long had a productivity crisis. Productivity is driven by investment, innovation, and competition. Business leaders have the opportunity to pull these levers every day."

“Inflation is holding steady at 4%, bringing a sigh of relief to bankers, business owners and people. But the reality is that without high productivity, wages remain stagnant. The standard of living for everyone depends on strong productivity."

“The missing piece of the productivity puzzle is leadership. Productivity increases when leaders are decisive and courageous. Productivity declines when leaders vacillate and suffocate – when they are untrusting, micromanaging, and quite simply, not acting powerfully. In many countries with large mature economies, it’s easy for complacency to set in (the same can be said of leadership in large mature companies). The demise into stagnation is slow and impossible to feel day to day. Collectively, we kick the can down the road. The digital transformation stalls, the push into the new market pauses and the toxic team member is never dealt with."

“In my recent global study I found that in the UK, a quarter of emerging leaders are leading with unconscious fear, costing a staggering £2.2 billion drop in productivity and performance. It’s estimated there are 235,000 fearful leaders in the UK, nearly a quarter of all emerging leaders (leaders at the earlier end of their leadership experience)."

"Alarmingly, they’re learning from more experienced leaders, who have created the productivity problem," she continues.

“For productivity to increase, we urgently need business leaders and managers to look internally at their own leadership. Solving the productivity problem in your business is not beyond you. It is you.”