Understanding the Impact a Recession Might Have on the UK Economy - Cobra Financial Solutions Ltd

No-nonsense, straight-talking debt collection service

A recession is defined as being a significant decline in activity across the economy, and the UK is no stranger to one. But, what does that mean for our economy, and how does it impact us?

Recessions last for a prolonged period of time and they can result in increased unemployment rates, decreased consumer spending and reduced business investment. Recessions can be caused by a multitude of things but, regardless of the cause, they have a huge impact on the economy as a whole.


How Does a Recession Impact Our Economy?

As the UK is connected to a lot of international markets, our economy is impacted by challenges around the world. For example, natural disasters and geopolitical tensions can lead to recessions abroad, and they are likely to impact the UK. We also have our own challenges to contend with, including changing government policies and consumer behaviour.


  • A Recession’s Impact on Consumer Behaviour – Consumer behaviour changes during a recession, as shoppers become a lot more cautious with how they spend their money. Spending money on non-essential goods and luxuries isn’t a priority, and a lot of people avoid big purchases, such as buying a house, a car or going on expensive holidays. This has a knock on effect on various industries.


  • A Recession’s Impact on Employment – A recession has a big impact on employment and the labour market. It can lead to rising unemployment, a lack of job security for workers and wages not being increased as expected. Though a lot of workplaces are impacted, a recession tends to hit retail, manufacturing and hospitality the hardest.


  • A Recession’s Impact on Businesses – When a recession hits, businesses are faced with a decreased demand for goods and services. With consumer spending down and it becoming increasingly harder to get credit, everyone has less to spend. For businesses, this means lower profits and a pressure to cut costs wherever possible. Though all businesses are impacted, it’s SMEs that are the most vulnerable, as staying afloat is harder with fewer resources. Some businesses have to downsize, let staff go or close.


  • A Recession’s Impact on Financial Markets – During a recession, financial markets can struggle and the price of stocks, bonds and currencies can go up and down. Investors often start looking for safer investment options, such as gold and government bonds, and riskier investments can lose value as people start to sell them off. Banks and other financial companies also struggle in a recession, as more people have trouble paying back loans and fewer people want to borrow money.



How Does a Recession Impact Debt and Debtors?

With consumer spending dwindling, many businesses struggle to stay afloat during a recession, but reclaiming debts can make a big difference. If you are owed money as a business, start the debt collection process and recover money that’s rightfully yours. This is something that Cobra Financial can help you with. Contact us today to find out more.

Find out more about our awards and accreditations +