UK Businesses Braced for Stormy 2024

The UK economy is undoubtedly on shaky ground. We may have narrowly avoided the quicksand of a recession in 2023, but as we head toward the inevitable downturn that awaits us in 2024, the urge to panic becomes ever more overwhelming.

A report from the Institute of Fiscal Studies (IFS) warns that the UK will fall into a recession at the start of 2024 which, it predicts, will last for nine months.

It’s fair to say that tough economic times are inevitably on their way, but the jury is still out on the best way for individual businesses to approach them.

Our own Speakers Corner survey recently found that 99% of companies are making changes to prepare for recession, yet 22% still feel unready.

The natural inclination when a recession hits is to hunker down. Economic downturns usually lead to reduced consumer spending, lower demand for products or services and increased financial challenges for businesses. An instinctive response is to cut back on the money you spend on employees. And workforce adjustments are one of the most significant changes companies make to stay afloat.

But, just like quicksand, many businesses might find the best way to tackle this is with a counterintuitive response. Instead of cutting back on employee spending that isn’t conspicuously bottom-line-critical – instead, continuing to invest in inspiration, innovation and motivation - might be the solution your business needs to prevent it from sinking under.

While it’s easy to talk about ‘unprecedented times’ and expound on how Brexit, the pandemic and ongoing wars have created the perfect storm for a 2024 recession, it’s worth considering that recessions are, unfortunately, cyclically inevitable. Economic expansions are always followed by contractions, and vice versa. But the good news is that this means we can learn and apply lessons from previous recessions to the one that’s looming.

Tough economic periods can create a sense of uncertainty and anxiety among employees but at times like these, a strong sense of belonging and purpose is particularly important for the individuals that make up your business. 

Spending in ‘softer’ areas like building company culture, increasing employee engagement or maintaining motivation is often one of the first things to be cut because there’s no direct day-to-day correlation between employee wellbeing and bottom-line profit. Yet, one of the main takeaways from previous recessions must be the benefits that engaged employees generate.

Hindsight shows us that company culture becomes even more crucial during a recession. A strong and positive culture can serve as a stabilising force, fuelling creativity and problem-solving. Inspired employees are more likely to think outside the box and come up with innovative solutions to help a company adapt and thrive – because engaged employees are thinking about the whole company culture, how they fit into it and how their individual ideas can lead to better decisions.

Research backs this up. According to the global analytics firm Gallup “concentrating on employee engagement can help companies withstand and possibly even thrive in tough economic times.”  Companies with engaged workforces have higher earnings per share (EPS) ad they seem to have recovered from the 2008 recession at a faster rate. Businesses with a critical mass of engaged employees outperformed their competition. Researchers also discovered that as the economy began to rebound after 2009, having an engaged workforce became a strong differentiator in EPS.

It’s not a niche phenomenon – Gallup found that the strong correlations between engagement and performance are highly consistent across different organizations from diverse industries and regions of the world.

And it’s not just about inspiring creativity either. During a recession, where opportunities for internal progression may be limited, retaining your top talent becomes crucial.  Employees who are actively engaged in their current company are less likely to be actively looking – or open to – new job opportunities. Low engagement teams typically endure turnover rates that are 18% to 43% higher than highly engaged teams.

 It's clear that company culture has a significant impact on which companies survive the quicksand of recession and which panic and sink under. As counterintuitive as continuing investment into the ‘soft skills’ of morale and motivation may be, our previous experiences with British recessions prove how critical it is.

And the cherry on the cake is that focusing on a clear sense of purpose to inspire and engage doesn’t just promote resilience and adaptability during the recession – it also puts you on the right track for coming out of a downturn as well.

We may be starting 2024 with economic uncertainly hanging over us, but if your business can weather the storm with a strong company culture and inspired employees, you’ll be perfectly placed to hit the ground running when the unavoidable storm clouds have passed.