LONDON (Financial Times) - British companies are preparing for a recession this year as they face the double hit of slowing consumer demand and rapidly rising costs from inflation on their own businesses.
Multiple companies told the Financial Times they had begun “war gaming” for a recession in recent weeks, with some adjusting medium-term plans for a period of low or no economic growth. Online used-car seller Cazoo was one of the first to specifically warn over the threat of recession last month, forcing it to cut hundreds of jobs.
Shares in fast-fashion makers Asos and Boohoo plunged after they revealed a jump in product returns and warning over the impact of inflation. Bosses have said they already see signs of a slowdown, in particular among retailers given the impact of rising costs on consumers. Electricals retailer Currys cut its profit forecast this week, while rival AO raised £40mn in what its chief executive described as a “sensible piece of financial housekeeping given the short-term macroeconomic uncertainty”.
Stuart Rose, the former M&S boss and Conservative peer, warned that UK businesses needed to brace for a difficult period. “Most companies saw inflation coming. They have strengthened their balance sheets, taken appropriate measures and will now take the hit on margins. We will get through this.”
One chief executive of a leading supermarket chain said more people were waiting to do their monthly shop around pay days. Other shoppers were telling cashiers to stop at a certain limit — £30 or £40 — to limit expenditure. This made it harder for the chain to decide on orders for larger ticket items, such as clothing or electrical goods, he added, with questions about how demand will hold up in the autumn. The supermarket boss described September as the “come to Jesus” month — when the need to spend on new uniforms and school data-x-items coincided with the end of holiday spending and rising energy costs.