Industry reaction on UK falling into recession
As the Bank of England has hiked interest rates to 1.75%, the most in 27 years and warns that the UK will enter recession this year, Tommaso Aquilante, Associate Director of Economic Research at Dun and Bradstreet said: “The UK’s economic outlook has deteriorated rapidly in recent months, and the Bank of England (BoE) raising interest rates reflects the challenges faced by the UK. Today’s BoE press conference is an indication of how acute the activity-inflation trade-off is, and how opportunities for soft-landings might disappear very fast. Despite forecasting five consecutive quarters of recession, Governor Bailey strongly signalled that there will be further hikes as well as an acceleration on active quantitative tightening. With these and other announced decisions, the BoE wants everybody to understand how serious they are about price stability.
“Amid rising global political and insecurity risks for 2022, and consumers grappling with higher prices of essential goods, the growth prospects of the economy have weakened. Recession risks are rising not just in the UK, but across the globe as well, and economies need to prepare for potential prolonged periods of anaemic growth and elevated inflation.
“One consequence of tighter monetary policy is likely to be a stronger currency. Companies that conduct business on a global scale or rely on the services of foreign suppliers and customers will need to re-assess currency risk, especially relative to reserve currencies the dollar or the euro. This means that they need to constantly monitor the pulse of the economies where they directly or indirectly operate, as well as have a complete picture of their suppliers, customers, and potential customers to identify problems with cash flow early on and assist in their decision making. In times of economic uncertainty, strong cash flow management becomes mission critical.”