Gross domestic product (GDP) is a measure of the size and health of the UK economy measured over a period this can be one quarter to one year. Where there is a drop in the GDP % rate that can impact on unemployment as that increases. This connection is usually referred to as Okun's law.
Rising Prices
Economists have raised serious concerns about the UK economy after it shrank again in April. Rising prices are affecting businesses. The Office for National Statistics have said the economy contracted by 0.3% in April after it shrank by 0.1% in March. Some experts have warned there may be real risk of the UK falling into a recession as the economy has shrunk two months in a row. There are no signs the UK economy will stop shrinking or improve.
Businesses and households have also been hit hard by rising prices for food, fuel, and energy costs. The reaction to this is that businesses and households are cutting on spending in reaction to rising costs. At the time of writing, he average cost of petrol for an average family car is £100.
The Bank of England
The Bank of England has predicted a slow down of the economy, further inflationary rises resulting in higher prices and lower investment in the UK. Prices could increase a further 10% by the end of 2022. April was the first time since January 2021 that there had been a decline in services, production, and manufacturing. Only in January did the UK economy grow in 2022.
Further pressure has been added to businesses due the increase in National Insurance and the uncertainty caused by the war in Ukraine. There is also a risk of trade war between the UK and the EU which can result in further inflation and further risk investment in the UK economy. Businesses are also under pressure due to taxation, and some businesses have called for tax cuts. The Government have given support to households by way of energy packages to ease the impact of record energy prices. However, the risk of a recession stays a real possibility.
Considering the state of the economy, businesses may need to make difficult decision like assessing cost cutting measures such as reducing staff numbers, variation of staff employment contracts and readdressing any commercial contracts or ensuring that any new commercial contracts are not a financial burden like tied into erroneous terms for several years ensuring that there is appropriate insurance cover in place with legal expenses insurance.
Questcover can help explore options for HR management and business strategy.
Restructuring and Redundancy
We can assist you with the correct handling of your restructure and redundancies. Salary reductions may be a possibility with careful consultation with staff. Employers can consider reducing the working week so that staff work more effectively over a few numbers of hours The 4-day week for example is a new concept business can consider increasing productivity working few hours in the week. Where there is a temporary reduction of work employers may be able to place employees on short time working or place employees on layoffs.
Financial difficulties
Financial difficulties may cause health issues for employees and therefore employers should consider supporting staff with disabilities by making reasonable adjustments. The Equality Act 2010 applies to individuals with both physical and mental health issues. The legislation will apply to all employees regardless of the length of service and the Employment Tribunal can award unlimited damages against an employer who discriminates against a disabled employee.
This article is guidance on the actions you can take as a business. If you have any concerns on employment, legal or taxation matters please contact the Quest Advice line and speak to our experience staff on 01455 852028.
