Planning and innovation essential to surviving recession

RECESSION is an ugly word. It brings with it job losses, home repossessions, business failures and a general feeling of malaise that is hard to shake off.

At a Yorkshire Forward economic briefing yesterday the brevity and seriousness of the current economic downturn weren’t hidden behind rhetoric – they were laid bare in statistics and figures, observation and comment.

What was particularly noted was the transformation of the country’s and the region’s economy in a mere six months. Business and political leaders are clearly in shock. One Yorkshire Forward spokesman commented that the level of conversation about the current crisis with the banking sector and government was “incredible”.

A return to growth for the UK and Yorkshire is not expected until 2010. Job losses are predicted to reach a peak of 55,000 in the region, with Hull and South Yorkshire (excluding Sheffield) unemployment “black spots”.

The performance of the region’s plcs is also expected to be poor, domestic order books are to contract further although there is optimism for exports helped by a weakened sterling.

Unsurprisingly, profits are also set to decline further across the board with only the transport and communication sector performing better.

But while it’s an indisputable fact that the failure of the global banking system is a distinct contributor to the current economic downturn it’s also true that British business was unprepared.

The National Business Survey, commissioned by the country’s regional development agencies, shows an interesting trend – nearly two thirds of businesses don’t have a business plan.

Moreover, those who did were more optimistic in their predictions and were already planning increased marketing and sales activity.

Innovation too seems to have taken a hit during the UK’s growth years. More than 70% of respondents said they hadn’t introduced a new product or innovation during the past year. Those who had were more positive in their outlook. They also reported higher domestic orders and profit in the last 12 months as did firms who are members of specialist industrial networks.

Analysis shows that companies in the construction sector, followed by hotels and catering, and distribution are least likely to have formal business growth plans, while those in transport, storage, communications, and the financial services do.

Combine this with the banking sector’s “relaxed” approach to lending, and a high risk credit status for more than half of UK firms (according to recent research) the sudden collapse of economic stability isn’t so shocking.

No doubt the coming months and years will see the publication of new economic theories and warnings from history. In the meantime, business leaders need to revisit business basics. Planning, forecasting, budgeting, period close, risk management – in other words solid performance management.

And it’s not only business planning. Collaboration through the joining of specialist networks, investment in innovation, and the seeking of professional advice could help firms see the recession through and emerge stronger into recovery.

While Yorkshire Forward promises no miracles, it is committed to helping businesses through support services and consultation. It also plans to ensure that national policies have regional positivity.

There are no quick and easy solutions to surviving a recession and it’s an unfortunate fact that good businesses will fall by the wayside despite solid management. Adapting to the new environment and adopting best practice however seems to be the key to survival. 

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