Surviving the economic downturn and thriving in 2021
I recently featured on the UK Recruiters Crowd Cast and most of the conversation we had centred around what recruitment businesses should do now. I’m going over old ground if I talk about unprecedented times etc, we’ve all read and heard that too often now, but it’s certainly a time that I don’t think we’ll ever experience again in our lifetime. If, before all this started, you told someone that during 2020 the world would more or less stop, you’d be carted away. I’ve been reading and listening a lot about what this all means and, truthfully, no one really knows what will happen but I’ve put together my thoughts and advice for businesses and individuals.
To start with, we can look to what’s happened in the past to try and predict the future. Of course, it’s not quite the same as anything we’ve experienced before as this time we’re not just dealing with a financial downturn but a horrendous loss of life and the economic impact to follow. This is one of the reasons the decline in GDP is predicted to be as high as 15%. Because of this, I’ve been planning an 18 month recovery cycle which takes us into the end of next year – seems a lifetime away right now. This way, if nothing else, we’re busy fixing things ready for 18 months time to ensure we’re match fit and ready to go! We’ve spent and continue to spend a lot of time fixing and reviewing all those things we were previously too busy to do. You know the things that ‘kinda’ work, or the short term solution that’s been in place for a few years now – we all have them. Now is the time to be really efficient and slick with our processes through good housekeeping.
In the last recession, in 2008, the UK’s GDP dropped by 6%, meaning that unemployment rose from 5% to 8% (to put that into context, we were at 3.8% unemployment pre-covid-19) and available jobs fell from 700k to 430k.
In the last recession, in 2008, the UK’s GDP dropped by 6%, meaning that unemployment rose from 5% to 8% (to put that into context, we were at 3.8% unemployment pre-covid-19) and available jobs fell from 700k to 430k. We can’t currently officially say we’re in a recession as the figures won’t be available until August but, given the economy was in freefall within two weeks of the nation going into lockdown, it is “very likely” (to use Chancellor Rishi Sunak’s words) that we are now in the middle of one – and a significant one at that. If we assume this recession could be up to 2-3 times as bad as the previous one, we can expect the numbers to be higher than 2008 levels. The current furlough scheme is putting things on pause right now and it remains to be see what impact it will have on unemployment numbers. Some argue the furlough extension to October is actually counterproductive to the economy, especially within the recruitment space. Less jobs, less movement, etc. Many in recruitment haven’t responded positively to the news.
What I think we can expect is that, for the first time in a long time, we’ll have more candidates available, less jobs and more start ups. What we did see in the last recession is consumers being prepared to (or forced into) trying cheaper products and services and their demand for quality vs value drops, i.e. they’re prepared to both try and use a cheaper product and accept a proportionate drop in quality. Think shopping at Tesco vs shopping at Lidl. In fact 2008 was the time that Aldi and Lidl really grew. Most of us, me included, didn’t realise how great they were! So if you have a product that is cheaper and of similar quality, recessions can be a good time for business.
Recruitment technology wise, this is something that I’ve experienced at Wave pre-pandemic. There tends to be a general apathy to change technology – the hassle vs the proposed saving or feature improvement is too much. I get it. I absolutely understand the “why would we change? Business is flying, we don’t need to” attitude. The gap between resource needed and reward isn’t enough. Except of course now, when a 5% improvement or 5% decrease in costs could save someone’s job or someone’s business. So, review your tech, you might be surprised what else is out there, and with the right motivation the hassle to change needn’t be that high.
Next, look at every single pound leaving the business. I’ve always been pretty close to the numbers but, hands up, there were expenses going out that we simply had no need for. I found a telephone number forwarding service that were paying for, diverting an old telephone number to our current one. £15 a month. Makes sense I guess… until you realise it’s forwarding to an office that you moved out of 5 years ago. That’s nearly £1k of money completely wasted. In the end, reviewing all our suppliers, tech and expenses created savings of around £30k a year. I don’t feel great writing that but I do feel better knowing that we’ve forensically been through all our costs and we’re as lean as we can be.
Finally, it’s a good time to review your own products and services. Often those that fare so well pre-recession are no longer the best and most appropriate post-recession. As mentioned above, the emotional needs of the consumer change. I have been spending some time trying to predict what clients will want and need and am assuming that candidates are more readily available, recruitment consultants will be more conscious with spend and less prepared to sign up long term, competition will increase and companies will up their in-house activity. Have a think about your product and services range – do they still fit the market? If you don’t consider this others will. It was during the last financial crisis that the likes of WhatsApp, Uber, Insta and Slack launched so as much as you look to your existing competitors, beware the ones that rise out of this crisis.
It took fully 5 years to recover from the 2008 recession but at that point the economy was 11% bigger than it was before the crisis began, so the theory is that the economy always grows back bigger after a recession. So if we can hang on in there over the next 5-10 years we should exceed where we are now and even before Covid-19. This is an endurance marathon, not a sprint.
So, in summary, over the next 18 months get forensic on all your costs, look at your services to make sure they’re still relevant, and get everything in order that you’ve been meaning to. We may never have such an opportunity to evolve our businesses so quickly again.