Figures published by the Office for National Statistics last week reveal that the UK economy saw no growth in July 2024. This marks the second consecutive month without growth, as June also showed no change.

However, when looking at the three months ending in July, Gross Domestic Product (GDP) – a key indicator of economic health – grew by 0.5% compared to the quarter ending in April.

These figures suggest the economy is entering a period of stagnation after the growth and optimism experienced earlier this year.

What could this mean for your business?

Often, GDP figures reflect what you’ve already noticed, but what could these wider economic trends mean for your business?

  1. Cautious consumer spending: A lack of recent GDP growth could indicate waning consumer confidence. This may lead to reduced spending, particularly on non-essential goods and services. Sectors like retail, hospitality, and discretionary spending may be most affected.
  2. Cash flow challenges: Businesses often rely on consistent growth to manage cash flow. If sales slow down, it can become more difficult to maintain cash flow, especially for businesses operating on tight margins.
  3. Hesitancy to invest: Signs of stagnation may cause businesses to delay investments in expansion, new hires, or capital improvements. For B2B businesses, securing customer commitments may become tougher, and you might need to consider offering incentives to close deals.
  4. Potential for government support: If the stagnation persists, the government may introduce measures to stimulate the economy, such as tax reliefs or grants. Whether these will be beneficial will depend on the specific initiatives proposed.
  5. Sector-specific impacts: The July GDP figures indicate that while the services sector remained steady with 0.1% growth, production output declined by 0.8% and construction output dropped by 0.4%. Consider if this could present any opportunities for your business. For example, if your suppliers are experiencing fewer orders, now might be an opportune time to negotiate better rates.
  6. Supply chain risks: If your suppliers are affected by lower demand or fluctuating costs, this could impact the reliability of your supply chain. Maintaining good communication with your suppliers can help you spot early warning signs of issues or price increases, allowing you to prepare or consider diversifying your suppliers.
  7. Competition and market dynamics: In a slowing market, competition may intensify as businesses vie for a shrinking pool of consumer spending. This can drive down prices and margins, making profitability harder to achieve.

The recent lack of GDP growth suggests that a cautious and strategic approach will be necessary in the coming months. Focusing on efficiency, customer retention, and maintaining financial flexibility may be crucial to navigating potential challenges.

Economic fluctuations are a natural part of business, but as experienced business advisers, we can help guide your business through uncertain times. Please get in touch with us to learn more about how we can support you.

See: https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/july2024