The latest GDP figures showed that the UK economy grew by 0.1% in November, boosted by the World Cup and spending on food and drink. But bad economic news continues to stack up. The Bank of England is predicting a “very challenging” two-year recession. The Office for Budget Responsibility (OBR) has forecast a 1.4% fall in GDP (the standard measure of a country’s total economic activity) in 2023, a significant downgrade from its previous expectations. Most important for consumers is the fact that inflation is expected to stay high throughout 2023 and unemployment to start increasing.
The British public is picking up on this pessimism. Research run by Mintel in November 2022 shows that the vast majority of consumers expect inflation to rise over the coming year, and that interest rates will rise further, while more than two in five think that the UK’s economic output will fall.
Source: iStock.
Consumers recognise that this will affect their financial well-being, too, most think that the level of inflation will harm their financial situation, and half of consumers think that the UK’s economic struggles will hurt their finances.
How bad will the UK recession be?
In some ways, the coming recession will be very different from the post-2008-financial crisis slowdown. On the downside, inflation is much higher than we saw last time around: we’re facing a period of dreaded ‘stagflation’ where low economic growth combines with rising prices.
But there are also upsides. The OBR’s forecast of a 1.4% fall in GDP is among the more negative forecasts out there, compared to a 2.2% fall in the last three months of 2008. Also, while unemployment is likely to rise, it is currently extremely low.
What’s crucial for the consumer economy is that Brits are going into this slowdown with a war chest of savings that they built up over the lockdown years. The Bank of England estimates that consumers saved almost £200 billion more over lockdown than they would otherwise have done, and Mintel’s Global COVID-19 Tracker data shows that saving intentions are still strong.
Source: iStock.
What are the brand opportunities during a recession?
It’s easy to be so focussed on the threats, that you ignore the opportunities that economic upheaval can provide. The 2008 financial crisis was painful for many brands, but those that got their communication and innovation strategies right emerged in a stronger position. The financial crisis also triggered a wave of disruptive innovation as a new generation of entrepreneurs grew frustrated with corporate life, reassessed their priorities and decided to step out on their own.
At Mintel, we have been supporting our clients with market-leading data and insight for over 50 years. Our institutional knowledge and cross-category expertise mean that we’re uniquely positioned to look back at previous periods of economic disruption and understand what brands can learn from the past.
Using our latest consumer data, industry knowledge and experience guiding brands through previous recessions, Mintel experts analyse key areas of consumer spending and key recommendations for brands in the following categories: Food and Drink, Online Retail, Travel, Financial Services and Beauty and Personal Care.
Download Mintel’s FREE recession thought leadership analysis here.
Mintel clients can access this thought piece on clients.mintel.com
