The state of the UK economy continues to cause uncertainty across the country. With the UK unemployment rate rising to 3.6%, experts believe that these challenges could lead to a downward pressure that ultimately leads the country into a deep recession. 

For business there has never been a more appropriate time to look and plan how to navigate these uncertain and challenging times.

As co-founder and director of a growing business, I recognise the worries and concerns that business owners experience when the impact of a recession is high. At times like this, and from experience, it can be challenging to navigate the ever changing markets, deciding whether to invest more in the things that have always worked for you or to ease up and be more cautious to see how things play out. 

For up-and-coming business leaders it’s useful to look back at past trends and insight from the last financial crash to identify ways to make your business as recession-proof as possible. This is why we developed our ‘recession-proof index’. We analysed ONS business birth and death data from 2008-2013 to identify which industries are the most recession-proof for new business, which regions could see businesses fare the best and how long we can expect to wait to see some recovery of startup success.

How can the recession-proof index prepare us for the future?

In 2009, over a year after the recession began, startups in the East of England & South West saw the joint-lowest rate of business failures of all regions, at 23% making them the most recession-proof regions in the UK. On average, we also saw that startups founded in the North fare worse as a result of a recession than businesses in the South.

The least recession-proof regions which saw the highest rates of business failures in 2009 were London (30%), Yorkshire & Humber (28%) and the North East (27%). This could suggest these areas are likely to be most impacted by the current recession. 

What industry is the most recession-proof?

In the previous recession, the health sector has proven to be the most stable and safe for startups. The health sector stands out as the most recession-proof business for startups to begin despite the recession, according to further studies of data from 2008 to 2013.

Startups in the health industry had the lowest rate of failure two years after their launch at an average of 20%. This was closely followed by startups in the Information and Communication industry that had an average failure rate of 21%.

Despite the overall strength of the Health industry,  Yorkshire & The Humber bucked this trend as a region. It saw the highest rate of health business failures at 60% in the immediate aftermath of the last recession in 2009

Across 2008-2013, Scotland, East of England and the West Midlands were the most recession-proof regions to launch a startup in the Health industry, with an average failure rate of just 16% each. 

This emphasises how both the industry and region play an important role in how secure a startup can be in uncertain times.  Depending on your location in the UK it is clear that the data points to some regional variances in business success ratios but remains an important factor to consider in the long term.

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What industry is most likely to be impacted by a recession? 

The analysis from the recession-proof index also showed that by 2010, the situation had gotten worse for some industries, with the rate of business failures continuing to increase. 

Following the previous recession, it was shown that the property sector was the least resilient to economic downturns, with nearly a third (32%) of all startups collapsing within their first two years. This was the highest rate of business failures across all industries from 2009 to 2013. 

Startups in business administration & support services failures increased by 8% in 2010, with two in every five (40%) businesses failing in this year. The failure of startups in arts, entertainment, recreation & other services increased by 6%, with a third (33%) of businesses being unable to survive the recession.

How can we prepare for a future recession?

Fortunately, technology has advanced since the last recession, here is some of my own advice for startup founders to look at as we enter uncertain economic times:

  • Be flexible and ready to adjust. In a time of economic uncertainty, changing your business model or product may seem risky, but it could mean the difference between success and failure.
  • Look into utilising cutting-edge cloud-based business solutions that can also offer vital information on the performance of your company’s sales. Knowing what’s working and what isn’t will help you make informed decisions.
  • To maintain sales, wherever possible, keep up with the regular course of the planned marketing efforts. Recessions are not times for expansion, but more for maintenance. When trying to survive a recession, businesses that severely cut back on their marketing efforts witnessed a steep fall in growth.
  • Seek out systems that make it simple to integrate everyday technologies like CRM apps, Office 365 and your email. A single platform can boost team productivity while being more cost-effective.
  • Minimise overlapping software and ineffective hardware to streamline your tech stack. In a recession, this can easily turn into a drain on resources like money, time and labour.

Nobody can determine what the future holds, but we can use what we’ve learned from the past to prepare and make better choices moving forward, and hopefully help us survive these uncertain times.

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