The Next Recession Might Not Be That Far Away

I think it’s time to mention that “R” word again. Yes, recession. The last one we had was the Great Recession, brought on by the downfall of Lehman Brothers in the US which started a global financial crisis which nearly brought the functioning world to it’s knees. We were literally hours away from financial meltdown.

It’s going to take something extraordinary to send thins crashing to those levels again. And I am in no way suggesting that things could be about to get that bad again.

But, and there is always a but, all good things must end, and when it comes to the UK economy, the grind southwards might not be that far away.

The ten year cycle

On average, not exclusively but on average economic booms and busts take about ten years. We had our last big bust during 2008 and 2009. The global economy suffered massively, only being surpassed by the Great Depression in the thirties. The window and door industry lost thousands of companies and has been rebuilding in many new and evolved forms ever since.

We’re now ten years on from those very dramatic years and things have been pretty steady when it comes to UK GDP growth:

Other than in 2008 and 2009 which were the recession years, there has been steady growth in the UK economy up until present day. Not rip roaring growth like we have seen in places like China and India or even certain parts of Europe, but steady growth nonetheless.

Even with Brexit in 2016, growth has continued. We’re ten years now from the start of the last recession, with growth in the majority of those years. We have recovered more than we lost in that recession and have progressed. However, we cannot grow forever. There has to be a point where things overheat and start to derail, even just a little. And looking at certain stats and figures, we may not be that far away.

For example, UK unemployment is the lowest it has been since the mid-70’s. The same is happening in the the US right now. There is an argument that unemployment cannot realistically get any lower, we have reached the basement. So there may be no more slack in that part of the economy. That is a very broad brush approach to thinking of it of course but it’s the general tone of the business news community right now.

From a window and door industry perspective, if a recession is to come, perhaps within a year or so, it might not be all that bad.

What the window industry needs to do

Firstly, it doesn’t need to panic. Many of the alarm bells for recession are not yet sounding. Many commentators, if you believe what they say, say that we’re at least 12-18 months away.

Now that might sound a lot, but from an economics standpoint, that’s a flash. So this is why it’s worth talking about this now, so our industry can potentially see a little bit clearer down the road and make preparations for what might happen, if indeed it happens at all.

The window industry needs to perfect the diversification it has produced up to now. At this moment in time we’re swimming in an endless sea of product options across all the major material groups. And whilst choice is a good thing, much of it is not perfect. Production and quality issues still dog many areas of our sector. If the economy is to slow down and drag home owner spending with it, it is going to be vital our supply chain loses as little money as possible down to errors and poor quality. Easier said than done I know, but that is why product training must be increased for all those involved in the making of said products.

Next, marketing has to be stepped up. There is still plenty of business out there to be had. Home owners are still spending and willing to invest in their homes with the right products at the right budget. Home owners need to be able to find the companies to suit them. They aren’t just going to walk in off the street. Installers have to continue to shout about themselves, perhaps even more so now than before. Fabricators also need to do the same. There is plenty of choice out there for installers now. Fabricators need to be able to demonstrate effectively and quickly how their products and customer support can help installers win business from home owners.

Companies across the supply chain also need to start polishing their finances. That means paying down debt and ensuring cash and cash flow is healthy. If interest rates start to rise in any significant way (there’s a rate rise coming in May by the way) then more and more money is going to be spent servicing that debt. So the more we can all pay down our debts, both in business and personal, and quickly, the better.

It’s not time to panic, but rather a time to plan. We’re nearing the end of a tried and tested economic cycle so at some point the good times will once again start to fade away. It then becomes about balanced management and seeking new opportunities to ensure stability and growth where it can be found.