Businesses face even harder balancing act as GDP tightrope wobbles - comment

There has been repeated use of the word “bleak” on the part of business commentators regarding the economic outlook in response to the news that UK gross domestic product retreated by 0.2 per cent between July and September, meaning that the country may have entered the longest recession in a century.
A shrinking economy is 'dreadful' news for under-pressure firms, according to one commentator (file image). Picture: Hollie Adams/AFP via Getty Images.A shrinking economy is 'dreadful' news for under-pressure firms, according to one commentator (file image). Picture: Hollie Adams/AFP via Getty Images.
A shrinking economy is 'dreadful' news for under-pressure firms, according to one commentator (file image). Picture: Hollie Adams/AFP via Getty Images.

The announcement is sandwiched between the Bank of England recently imposing the sharpest jump in interest rates in 33 years, and ahead of Prime Minister Rishi Sunak and Chancellor Jeremy Hunt next week unveiling the Autumn Statement amid calls to prop up floundering households and companies – all against the backdrop of business confidence having tanked in recent months.

However, in the view of Leonor Calaça, owner of Edinburgh-based knitting and yarn specialist Eleanor Shadow, perception of the economic temperature can be more damaging than reality: “As a one-woman, micro-business owner, I am concerned that the way people feel about the economy – more so than the actual state of the economy itself – will make them shy away from non-essential purchases. I would like to see next week's Autumn Statement announce specific measures to protect small businesses from going under.”

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Indeed, the Federation of Small Businesses is seeking a “clear set of measures that will help boost prosperity, growth and jobs”, with a shrinking economy “dreadful” news for under-pressure firms, according to the organisation’s national chair Martin McTague.

He deemed the drop in GDP “one headline figure made up of countless bits of disappointing news for small businesses across the country – a new venue or premises they couldn’t open, a contract which ended unexpectedly, a staff member they had to let go”.

Also commenting was Craig Mackay, head of specialist change consultancy Proteus, who zoomed in on one part of the latest GDP figures that he deemed “especially worrying” – total business investment having dropped 0.5 per cent in the quarter. That echoes a recent survey that showed investments in fast-growth Scottish businesses cooled over the summer amid an unsteady economic backdrop.

Mr Mackay believes the latter has brought about a “nigh-on impossible landscape for business operations” – although he has also warned that cutting spending now “will make recovery much more difficult in the long run”. But surely for many bosses, tightening purse strings is the only imminent path to survival.