Is now a good time to grow your business?
With tentative green shoots of growth in the UK economy, is now the right time to gear up for growth – and if so, how?
The UK economy has endured a turbulent decade. From the Brexit backlash to the Covid crisis, inflation, labour shortages and lagging productivity, it’s fair to say the country hasn’t been at its brilliant best for a while.
GDP has been on a rollercoaster ride since the financial crisis in 2008/9, with tepid 1% and 2% growth during the 2010s torpedoed by the pandemic, which saw growth nosedive by minus 10.4% in 2020 and then seesaw to 8.7% uplift the following year, only to dribble to a halt in 2023.
But with all this behind us, optimists will argue that we could very well be on track for a period of economic stability and, dare we whisper it, sustained growth.
Today, Brexit is largely a known quantity and work continues to this day to remove as many barriers to trade as possible. Inflation is on a downward trend and most economists expect an interest rate cut in August.
Industry survey evidence remains patchy, often due to factors like the terrible British weather, but there is evidence of a bounce back from the technical recession that happened in the second half of 2023. Growth in Q1 2024 was a respectable 0.6%.
“We expect improving incomes to bolster consumer spending, while investment should also benefit from easing credit conditions,” said economists at KPMG in their regular GDP forecast. They added:
“The outlook for inflation is broadly positive, supported by favourable developments in food and energy prices. We expect interest rates to fall by 100 basis points this year and to settle at 3% in the second half of 2025.”
And with a potential bounce from the pending general election, as well as, no doubt, a huge increase in leisure spending due to England’s campaign in Euro 2024 as well as the Olympics, it’s possible there’s a brighter picture to look forward to.
Time to lay the foundations?
Though a stronger economy is far from in the bag, businesses up and down the UK are emerging from last year’s recession with a growth mindset. Now could be the best opportunity in 10 years to plan, structure, invest, invent and sell.
“With interest rate cuts and lower inflation on the horizon, it's a great time for businesses to gear up,” argues Tom Stone, co-founder of re:act, a digital agency.
“Get everything in order now so that when the economy picks up, your business can hit the ground running and make the most of the opportunities ahead.”
Stone has a few recommendations for businesses wondering what they should be focusing on, including investing in better tech, staff training and recruitment, as well as finding finance to fund expansion projects as the cost of borrowing drops.
Bamboo PR’s managing director, Marco Fiori, meanwhile, suggests addressing the fallout from the recent past, particularly its impact on the morale of your workforce.
“Your people are what drives your business, so focus on patching up any internal challenges caused by economic strain and gloomier times. If your team is good to go, get your house in order.”
UK economic sectors to watch
As always, whether your business is in a position to grow depends partly on factors beyond your control, such as the industry sector it operates in.
The UK’s consulting market grew 4.7% last year, according to Source Global Research, boasting revenues of more than £15 billion. While this was down on the record gains seen the previous year, and factors like geopolitical tensions and macro-economic headwinds impacting things in 2024, the sector appears to have solid foundations for further expansion.
The tech surge of recent years, powered by cutting-edge innovations such as machine learning and the Internet of Things, as well as the infrastructure that underpins them, has provided fertile ground for related sectors.
Lithium battery manufacturing in the UK is expected to grow a whopping 56% by 2025, according to stats from IBISWorld, while electricity and telecoms infrastructure development is hot on its heels at 54%, as well as language learning software at 22.4% and immersive tech at 21.3%.
But it’s not all work, work, work: healthier appetites are driving significant expansion at non-alcoholic beer brands, with 23.2% growth expected in the next 12 months, and in social media platforms, coming in around 20%.
Conversely, the picture is bleaker for some legacy industries, particularly coal mining, which is expected to decline by nearly a third in the timeframe thanks to cleaner fuel alternatives.
Iron and steel manufacturing will continue its fall, under pressure from international rivals, while the same goes for the manufacture of electrical gadgetry. Perhaps more surprising is the expected 17.4% decline in investment banking.
So, the economy is not without turbulence, and while the grey swans and unknown unknowns abound, it continues to be a good market for consultants and contractors who can parachute in to fix problems at short notice.
Winds of change
With a General Election just around the corner, business owners and executives are wondering out loud about the shape of things to come. At the time of writing, the latest poll tracking suggests a handsome victory for Labour, who could earn double the votes of their Tory rivals.
So it’s probably worth looking at Labour’s plans for business and trying to divine whether affluence or austerity is in the post. From the off, Sir Keir Starmer has taken great pains to separate himself from his predecessor Jeremy Corbyn and convey a pro-business message.
It couldn’t be clearer. In a speech on the campaign trail in June, he said:
“This is a manifesto for wealth creation - that is our number one priority. The mandate we seek from Britain at this election is for economic growth."
Stirring stuff, but what does that actually mean? Wading into the weeds of the manifesto reveals a £24 billion pledge for green initiatives with an aim to create 650,000 jobs in renewable and nuclear energy by the end of the decade.
There are also plans for a major boost to house building, though we’ve heard that before, and more spending on skills and education, which should help to fill gaps in the workforce of the future.
Previously, Labour pledged to tackle late payment, scrap business rates, revitalise the British high street and lend a helping hand to small business exports by removing barriers and reducing red tape.
This should be music to the ears of Sinead McHale, CEO of cash flow management app Satago, for whom late payment is a top priority.
“Despite the UK no longer being in a recession and easing inflation, business costs remain high. With limited access to finance and late payments persisting from larger corporations, SMEs and growing businesses continue to grapple with profitability, sustainability and growth.
To ensure their continued success, SMEs need political parties to propose measures to improve payment terms and cash flow, such as enforcing stricter penalties for late payments from larger companies and incentivising prompt payment practices.”
Finding a strong base for growth
This is, of course, a snapshot in time, with history showing that economies can rise and fall with the slightest of provocation - so watch this space for further commentary on what the autumn will bring as the new Government settles in.
In the meantime, it's good to remember that some things don't change all that much. Good bosses are experts at agile leadership and flexible strategies, meaning they can survive and thrive regardless of what the economy throws at them. For Seb Robert, CEO and founder of delivery service Gophr, the best advice is to get the fundamentals straight, then worry about the rest, whether we’re in for a boom time or not.
“It’s about getting the basics right. Make sure you are delivering for your customer's needs, that you are reducing waste and being as lean as possible. Be clear with your message and make sure you have done your sums. It all sounds pretty boring, but it is generally the boring ones that grow. The flashy stuff can come later.”
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