As we enter the new year, predictions on how the economy will develop in 2023 have been discussed – with many considering the prevailing cost-of-living crisis. Various firms, such as KPMG UK, delved into the topic by forecasting significant changes in consumption patterns.
The economy has been expected to slow down in 2023 before the new year. Although the UK government has provided cost-of-living payment help for eligible individuals, businesses that cater to non-essential goods or services will be significantly impacted by the decrease in consumption. Companies will need to strategize appropriately to weather the storm brought by the recession.
READ: Preventing Sexual Harassment – Worker Protection Bill
KPMG Research on 2023 Spending
The research by KPMG UK which was published in December 2022 surveyed 3000 consumers on their spending or consumption intentions in 2023. Through this, it was found that 61% of consumers will be cutting discretionary spending this year – with only 4% saying that they can increase their spending. This can be understood as the impact of increasing costs for essential spending, further reflected by the 43% of respondents admitting that they will be dipping into their savings to support their living costs.
This shows that prioritisation is becoming necessary to sustain the lives of many. With prioritisation comes compromises, and it is known through this research that 61% of participants are looking to cut costs in non-essential spending such as eating out – which is regarded as the most common thing to be omitted from the respondents’ spending intentions.
Business owners in sectors that are considered non-essential will need to prepare and strategize the year to avoid dire consequences.
Preparations for Business Owners
Although the current economic situation is unfavourable, there are actions that can be taken by business owners to prevent serious and long-term impacts of decreasing consumption. Forbes as well as British Business Bank have laid out several recommended measures that can be taken for business owners to tackle the economic slowdown. The main points are included below.
- Reassessing Costs
With recessions, it is key to cut back on non-essential costs within businesses. Many small businesses are already running on small margins, and this will be a significant action to take to sustain small businesses. Cheaper alternative options should also be considered. Costs to be reassessed can include manufacturing, inventory and operational costs.
- Procure Locally
Among the unnecessary costs, focusing on procuring locally as much as possible can help contribute to more efficient spending. By sourcing locally, shipping and import costs can be avoided or minimised. Additionally, relying on domestic supply chains can be a better option in a global recession as it will be more resistant to the repercussions of geopolitical events.
READ: Employee Mental Health Will Improve in 2023, Says Koa Health
- Support Employees
It is important for businesses to consider that their employees are also experiencing rising living costs. Increasing pay may not be a viable option for many businesses, but employers should consider other ways to accommodate and empower their employees amidst an economic decline. Initiatives such as working from home or corporate discounts for essential goods and services may be more realistic options to implement.
- Focus on Planning Income
Ultimately, businesses should plan on how they will still make income this year with decreased consumption. Think about how to help consumers while also actively maintaining their consumption with the business. Programmes such as memberships, rewards and discount schemes may motivate consumption. It is important to remember that although most will be very strict on their spending priorities, people will still want to make non-essential spending for leisure and entertainment purposes. Well-devised marketing and sales strategies may be the key to helping businesses push through the year.