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COVID-19 Is this really a recession?

And it all started so well!

2020 kicked off with a real level of optimism in the UK economy, we had avoided a recession for 10 years, in real terms wage levels had at last exceeded those in 2008, unemployment was at an all-time low and the Government had just won a significant majority, not to mention the unachievable had been achieved … we had agreed an orderly exit from the EU!

But then … well, we all know what then; the latest economic statistics show GDP falling by 5.8% in March alone, the largest ever fall since recordings began. Q1 overall showed a 2% fall in GDP, but that is obviously not the end. Oxford Economics forecasts GDP to shrink by 14% in Q2 and by 8.3% over 2020 overall, so bang in the realms of recession surely?

Well, maybe not; we have never been here before and, in reality, this downtick in GDP has not been created by any of the typical recession-making reasons, it has been created by Government Policy. Whether you argue that it has been handled well or badly, there is no real argument to say that the cause is clear; it has been due to a planned shutdown of many parts of the economy.

So where does that take us, well this planned shutdown is already well on its way to being relaxed, and whilst some of the spending that should have happened during this period has been lost; the meals out, the gym visits, the holidays, even the trips to the hairdressers are not going to catch-up on themselves (well not for most people anyway), the bounce-back is already underway.

Oxford Economics expect, assuming the continued relaxation of lockdown, GDP to rise during the second half of 2020 to a full year level of a reduction of 8.3% and rise again during 2021 by 7.8% so that the economy is very close to being at the same level as 2020 started by the end of 2021.

In terms of human cost, COVID-19 has inflicted a terrible toll, and there is no way of even beginning to measure that in economic statistics, but from a pure GDP perspective the pain suffered during 2020 looks as if it may correct itself by the end of 2021.

Taking the two years together, most businesses will have had to go through tremendous change in order to survive, and then re-establish some kind of growth; but that is what businesses, particularly SME businesses do and do so well.

Catastrophe and innovation go hand in hand and SME business owners have proven this in the past and I am confident will do so again as we come out of this awful period and build a new norm.

So, is it really a recession? Technically the answer must be yes I suppose, but, from my experience of SME business owners, they will absorb it, do what they think is right and proper for their business and chalk this up on the board as another of those challenges that they have had to face.

As business brokers, we at Anderson Shaw Corporate Finance Ltd, are always happy to advise business owners about any aspect of selling or buying a business and the processes involved. If you are thinking of doing either, now or in the future, please contact us for a confidential, no commitment conversation. We will be pleased to provide a business valuation and discuss your plans in relation to your business.


Anderson Shaw has offices on the outskirts of Coventry and provides business broker and corporate finance services for clients throughout the Midlands and the UK.

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