It therefore seems that the economic slowdown is symptomatic of the EU as a whole. Having said that, the report does place the blame for stagnation on slowdowns with the US and the UK, “suggesting that the ECB’s more aggressive stimulus is helping to offset sluggish external demand.”
In the Manufacturing sector, fortunes are not looking much better. The UK Manufacturing PMI remains at its lowest since February 2013, due to a decrease in output and new orders. Interestingly though, it is the larger manufacturers who are feeling the brunt of the downturn with SMEs in the sector reporting a growth in their workforces.
Admittedly, the EU Referendum was mentioned as a potential reason for the continued decline of exports but it was also noted that the global economic slowdown was a key factor. This is confirmed by the J.P.Morgan Global Manufacturing PMI, which reported that world-wide growth was at a ‘near-standstill’ at the start of Q2.
Dropping demand is causing manufacturing to stutter globally
Therefore, it is not just the Eurozone that is suffering. Production is at a two-year low in Japan, China has stagnated and downturns were reported in the US, India, Indonesia, Brazil, Russia and Malaysia. Surely then this cannot all be blamed on a UK Brexit?
Turning to Services, the global outlook was more positive, with April PMI data showing expansion. However, in the UK the news was not so positive. CIPS/Markit data reported a 38-month low for the Business Activity Index and the slowest rise in employment since August 2013.
There was evidence that the EU membership referendum had “added to prevailing economic uncertainty”, but blame was largely placed at the door of the National Living Wage, which has resulted in compound cost increases.
Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply (CIPS), said:
“Mounting global economic uncertainty at the top of the supply chain and the reality of the new National Living Wage at the bottom mean that firms are feeling the pinch from both ends.”
He continued: “The EU referendum and introduction of the National Living Wage are unique moments in time for the UK services sector, and indeed the wider economy.”
Once again, it seems that Brexit uncertainty is not the only factor having an influence on declining fortunes, but part of a group of issues conspiring to paint a bleak picture.
One-off factors like the National Living Wage have hit businesses too
So what can business owners do to brighten the outlook?
When looking at the economic landscape from a macro perspective, it can all seem rather daunting and scary. The key is not to panic and not to get overwhelmed. By focusing on your business, making it the most efficient and cost effective it can possibly be, you will be best placed to protect yourself.
1) Employees are your greatest asset
Employee engagement seems to be a bit of a buzz word right now, but that should not negate its importance. The National Living Wage, as mentioned above, has resulted in cost increases for many businesses, but instead of reducing your workforce, why not invest in them? Use the fact that you are paying them more as a reason to ensure they are reaching their full potential.
By showing your employees you care about their training and progression it is more likely that they will work harder for you, earning that government mandated pay-rise and benefitting the business long term.
2) Be available to your customers
We now live in a world where instant communication is expected, not only from our friends and family, but also from businesses and brands. And it is not only immediacy consumers crave, it is also a connection.
On average, it is estimated that consumers receive over 1,900 messages from brands and influencers every day, so there is a lot of competition out there to overcome if you want to be at the forefront of your audience’s mind.
The best way to connect is through empathy. Learn about your customers, ask them questions and find out what they care about then structure your marketing efforts around that. Make your business matter and whether the UK is in the EU or not, customer loyalty will remain.
3) “Don’t put off for tomorrow what can be done today”
The age-old adage that parents and teachers alike told us time and time again as teenagers could not be more applicable in the current economic situation. As mentioned right at the beginning of this article, it is uncertainty that is blamed for stagnation and this is the result of people being too nervous to act, resulting in a downturn.
Don’t add to the paralysis that is currently plaguing the economy. Invest in capital, make plans for the immediate future and actively seek expansion opportunities and partnerships that will make your business great.
Action doesn’t have to be all about spend, spend, spend either. Proactively seek out savings that can be made, such as switching to a cheaper energy tariff, cutting down on stationery expenses and nurturing the staff you have instead of searching elsewhere.
Whatever the outcome of the EU referendum, day-to-day business will continue. Consumers will still require goods and services, and businesses will continue to need each other to meet those needs.
Yes, uncertainty is an unfortunate side-effect of any big political change, but as long as those 99% of British SMEs that drive the economy forward continue to do their best for their business, their customers and their employees, we should not be afraid.