2023 UK Recession: What it Means for Businesses and Graduates in Today's Economy

So it’s official.

The recession is here.

With an inflation rate of 10.5% at the close of 2022, and both KPMG and Goldman Sachs forecasting a 1.2% and 1.3% contraction in G.D.P respectively, the UK Economic Outlook doesn’t make for positive reading.

It's not all doom and gloom, however, as whilst the duration of the downturn may be relatively long, the drop in activity is expected to be mild by historical comparison. (See Fig. 1)

Fig. 1: The graph reveals that the maximum projected dip in UK GDP during the ongoing downturn will be the mildest compared to historical recessions.

Causes and Effects of the Current Recession: A Brief Overview

KPMG explains that “the main driver of the current downturn is the squeeze on (household) incomes and weaker consumer spending.” Additionally, 2022 also saw an increase in food & energy prices and inflation rates. These factors combined, amidst geopolitical instability in the wake of the COVID-19 pandemic, to expose businesses to higher energy costs and dwindling investments. As a result, companies in several sectors have had to cut back on operational expenditure.

The recession has also lowered the purchasing power of households. Some homes are cutting into their savings to smoothen spending during the current economic downturn. Others, who have lost confidence in the market or have developed concerns about a lack of recruitment opportunities, are instead opting to increase savings, further cooling the economy.

Returning to UK businesses, here’s a deeper look at how companies are being affected by the recession:

Businesses: Austerity in Anticipation of Support Measures

Since the COVID-19 pandemic, lowered household incomes and a general change in purchasing habits have led to a shortfall in expenditure on non-essentials. Due to this, companies in the UK are recording high volumes of surplus. As mentioned earlier, business investments have also diminished, and borrowing costs have increased. Higher input prices and lower customer demands have created tighter margins and undermined existing business models. The KPMG report considers this, and highlights the possibility of a rise in non-performing business loans, and the volume of insolvent businesses in the UK economy.

The UK government has not been passive about the financial challenges it is facing, though. In November 2022, it committed to a package of economic support measures that Finance Minister Jeremy Hunt described as necessary to limit the highest inflation the UK has experienced in the last four decades. The recessionary fiscal plan, dubbed the “ultimate growth strategy” by Hunt, includes spending cuts of around GBP 30 billion, and tax hikes worth nearly GBP 25 billion, to boost public finances and pay back the UK’s debts. This plan will likely increase business investments and lower borrowing costs.

However, the present economic circumstances could be interpreted as a perfect storm of pressure for young graduates seeking gainful recruitment. But they needn’t panic, as every cloud has its silver lining. For graduates who are currently looking to enter the professional stream, things aren’t nearly as bleak as they may seem, and here’s why:

Graduates: Upwards Pressure on Recruitment

Some good news for professional candidates is that this is not a typical recession where recruitment and skills are concerned. Jisc, a digital agency focused on education, explained in a November 2022 blog, that usually, “we would expect 2023 to be very tough as job losses begin in earnest, perhaps starting to recover a little later in 2024 as businesses adapt and adjust to returning demand. But we are in an atypical recruitment and skills situation. Older workers have left the labour market in droves due to COVID-19. As a result, demand for professionals is at an all-time high.”

Supporting Jisc’s claims are figures from an October 2022 survey published by the Office for National Statistics that revealed 0.9 unemployed people in the UK for every vacancy. This was the first time in recorded UK history that there were more job vacancies than unemployment. While the number of vacancies has fallen since then, it remains at historically high levels. With that in mind, here are some tips for job-seekers in the current economic climate:

MBA’s Top Tips for Job-Seeking Graduates

• First and foremost, don’t panic! Take a look at recruitment history in the UK, and keep in mind that UK graduates get jobs relatively quickly, economic shifts and downturns notwithstanding. Jisc supports this with some reassuring statistics: 2020 saw students graduate in the middle of the COVID-19 pandemic, with recruitment at 30% of its usual level. Fifteen months later, 89% were working or pursuing further studies, and in just a month more, another 6% had jobs.
• Use the resources your institution provides. Many colleges and universities have dedicated departments to help smoothen your transition from student to professional, and these can be invaluable during an economic downturn.
• Utilise MBA to find the 'dream job' or 'work experience' that you are looking for, we pride ourselves on providing the very highest level of candidate care, helping you to find your ideal role with job satisfaction guaranteed. We want you to excel, which is why we match your skills and expertise to a role that provides career prosperity.
• Above all, remember that someone values your skillset and that they’re looking for you, just as you are looking for them!

If you’re looking for work right now, and are feeling confused, don’t hesitate to reach out to us here. We’re recruitment experts who love making lasting connections between people and organisations, and we’d love to help you start your professional journey. 

 Conclusion

While the UK recession is forcing businesses and households to remain austere for the near future, government intervention promises to replenish public funds, providing much-needed aid to companies operating in the UK economy. Job-seeking graduates needn’t worry either, as the UK is currently experiencing its largest recruitment surge thus far.

 If you are looking for a trusted recruitment agency, look no further. MBA combines management and placement consultancy services with total talent solutions to handle all your job recruitment needs end-to-end. Get in touch with us here to find out what MBA can do for you.