What is a recession and how does it impact people and businesses? well when a country's
economy is growing, people tend to spend more and you may also see many businesses expanding as the
gross domestic product aka the GDP increases. But sometimes a country will experience a period of
economic downturn where the GDP decreases and if this happens for consecutive periods the
economic climate is viewed as being negative and the country will experience a recession.
Now the length of a recession varies some recessions can last for just weeks some will
last for months and some will last for years. Essentially there is no limit on how long a
recession can last for and if a recession carries on for a significant period of time it progresses
into something that's known as a depression. But even the shortest periods of recession
will have effects that are felt for a long time after it's over. You might now be thinking what
impact does a recession actually have? Well a few common indicators that a country is in recession
include high levels of unemployment and job losses, a slowdown in manufacturing and a lack of business
expansion, alongside the decline in people's real level of income and consumer spending.
But recessions are nothing new and the UK itself has been involved in a number of recessions in the
past. For example, the UK entered a recession during the height of the coronavirus pandemic in August
2020. This was after the UK economy suffered significantly and the GDP fell by a staggering
20.4 percent. There were many factors that caused this recession and influence the GDP to fall so
significantly such as the multiple lockdowns that were put in place which resulted in shops and
hospitality venues being shut physically to the general public and many businesses being forced
to close for good as they're unable to recover or survive the effects of these unusual trading
conditions where many people were also furloughed or even lost their jobs completely and consumer
confidence was at an all-time low. But there are many factors that influence a recession too many
to go through in just this short video. As I said earlier recessions aren't a new thing and the
UK has experienced lots of recessions in the past before the coronavirus pandemic, 2009 was the last
time that the UK experienced a recession when GDP fell by 7.2 percent, but we've also experienced
recessions in 1990 1980 a double dip recession in 1975 and 1973 then again in 1961 and 1956 so
that just goes to show how recessions are part of the economic cycle and they do happen quite often
over time. Now that we know some of the factors that cause recessions to happen and we're seeing
some examples of when the UK experienced recessions before, let's take a look at what
impact recessions have on people and on businesses first of all the impact of recessions are often
not felt equally across society and inequality can often increase as a result with people on
lower incomes typically feeling the pinch more or experiencing more severe consequences. But
in general, recessions impact people because some will lose their jobs, opportunities for a promotion
and climbing the career ladder are often limited, and experiencing a pay rise which is significant
enough to keep up with the rising cost of living is highly doubtful which means the average person
is left out of pocket and consumer confidence goes down. Also benefit payments and investment
into public services are often restricted in relation to businesses. No business is
Recession Proof no matter how big or small they are, while some businesses might actually grow
during a recession, the majority of businesses are likely to experience at least some negative
consequences of trading during a recession. For example, they might experience a reduction in
footfall and revenue as consumers are spending less which leads to a decrease in profitability
and periods of negative cash flow. Then because of this, shareholders can become dissatisfied which
is typically caused because the performance of a company goes down and therefore the value of their
holding and the amount of profit they receive in the form of dividends goes down. This can then
have a knock-on effect and lead to a decrease in quality standards and the overall customer
experience. The decrease in quality standards and the overall customer experience is often due to
the business trying to protect its bottom line by cutting costs in key areas such as the raw
materials they purchase, the production processes that they use, and the workforce. But in general it
tends to be the smaller businesses that lack the financial clout to survive a recession
whereas bigger businesses can often cut back on additional costs such as marketing, product