The lull before the storm

“May you live in interesting times” goes the Chinese proverb and a short reflection on the reality of the situation the country and the economy faces today makes me realise that history will look back on this period as a very interesting time.

I was fortunate. In 1974 I left University and started my career with Arthur Andersen, married a year later and enjoyed five years training to be an accountant. Being a student during the worst period for the economy in my lifetime was probably the best place to be. And in 1979 Margaret Thatcher came to the rescue.

You’d have thought we’d have learnt the lessons of the 1970s but perhaps memories are just too short. Although I don’t remember the 1930s, I see similarities with events leading up to 1939 as well. It feels like we’re about to have a last summer of the old order, where we can pretend everything will carry on as before and we might not face the discomfort change brings for many and opportunities for the few. I think that view naive, and wrong. Change is now inevitable; things are very unlikely to be the same again and there is nothing that can be done to prevent that.

Another storm is brewing that may well be as disastrous for the country and the economy as the 1970s but with the added threat of terrorism that will undoubtedly fuel the flames of discontent. Ironically it was the then Labour prime Minister James Callaghan who said:

“We used to think that you could spend your way out of a recession….that option no longer exists and insofar as it ever did exist, it only worked…by injecting a bigger dose of inflation into the economy…Higher inflation, followed by higher unemployment…That is the history of the last 20 years.”

But what does this have to do with your entrepreneurial business. Actually quite a lot, if you understand what might be about to happen when the storm hits. Just like in the Californian gold rush, where the real winners were the merchants who supplied the picks, shovels and pans, the products and services businesses are going to need to survive the next few years will be very specific and tailored to the circumstances.

Consider, for example, public services, utilities and transportation all of which may suffer shortages. How will your business cope and what additional support will you need? Where will it come from?

How reliant are you on technology and the infrastructure that keeps it working. Anyone who has lost an internet connection and email service will tell you how debilitating this can be for a business. Could you manage without access to these services for days? Weeks?

And what about interest rates? Is your business viable and sustainable if interest rates rise to double figures?

Or if inflation rises to 1976 levels (when it reached 26.9%) and imports of goods start to rise disproportionately. In the 1970s the share of Britain’s car market taken by imports rose from 14% to 57%.​​​

Now this may sound as though I expect the immediate future to be all doom and gloom. Far from it (although I do think we are in the lull before the storm and it would be a wise precaution to stock up on provisions and some storm protection). Change brings discomfort for many but great opportunities for the few and as entrepreneurs we can choose which camp we fall into.

Those businesses that expect the relatively benign conditions we have enjoyed (yes even including the financial crash in 2008) for the past 40 years to continue are in for a shock. Maybe one that comes round every 40 years! Are you ready?

Noel Guilford, Principal at Guilford Accounting
Noel Guilford is the principal of Guilford Accounting a small business accountancy practice specialising in advising owner-managed businesses on current accounting, finance, and tax matters. You can reach him via email at noel@guilfordaccounting.co.uk or by phone at 01244 660866. He is the author of the 'Figure it out - an entrepreneurs guide to understanding your business numbers' which you can obtain by visiting guilfordaccounting.co.uk.​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ His latest book, How to Build a Successful Business' will be published in 2018.

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