A dramatic fall in business investment

A significant piece of economic data yesterday that business students might consider as they develop their understanding of the business response to an economic slowdown…

Business priorities in a recession

Hamish McRae considers how businesses are responding to the challenges of recession in his Economics Life piece in the Independent this morning. Drawing on a new report from management consultants Arthur D Little he considers some of the strategies that businesses are adopting given the special nature of this downturn. Improving hygiene, fitness and building muscle ahead of the recovery figure prominently and there is a fascinating graphic illustrating some of the priorities of firms at this unusual time.

“Businesses that do survive the present harsh climate will emerge in much better shape. All downturns speed up the process of structural change in the sense that things that were going to happen anyway happen much faster that they would have done. But the speed of this one has been so extreme that the world is cramming a decade of such change into a year or 18 months. As a result a lot of firms that still appear weak right now may emerge in rather good shape when demand returns.”

Improving hygiene: Actions to cope short-term with the implosion of confidence and collapse of demand e.g. rationalising operations and cutting overhead costs, turning fixed costs into variable costs: 80-90 per cent of business respondents are giving these actions very high or high priority.

Fitness: Keeping talent on board is a very high or high priority for 82 per cent of respondents. Maintaining R&D and innovation expenditures is a very high or high priority for 67 per cent of respondents.

Muscle Building: preparing for the world to come beyond the downturn, for example building stronger relationships with regulators or a high priority to preparing for the low-carbon economy

Arthur D Little Prism magazine

Q&A - Outline the main costs and benefits of inflation

Inflation has many important costs and consequences for both society and business. However a stable and low level of inflation also provides some upsides for business.

Q&A - Explain the causes of inflation

There are two main causes of inflation:
• Demand-pull (when there is excess demand), and
• Cost-push (when costs rise)

Recession Bites - new food shopping habits

Tonight’s edition of the Money Programme looks worth watching, or recording – on at 22.00 on BBC2 (unless Wimbledon overruns by two and a half hours again, presumably!).

‘Recession bites into our eating habits’ looks at the changes in supermarket and food spending over the last year, as food prices have risen by 8% and consumers seems to be cutting back on luxuries and shifting to inferior goods – a good illustration of income elasticity of demand, and the effects of falling consumer confidence.

Sources of finance: PLCs turn to their shareholders

What do large, quoted companies do when they encounter problems raising bank finance and when they realise that their balance sheets are over-geared?  Have a rights issue...

Q&A - What is credit and why do businesses need it?

Credit is the lifeblood of any business - it is very difficult for a business to survive, and certainly grow without it.  But what is credit?

Small businesses in the middle of the crunch - insights for students

Lots of business surveys around at the moment provide insights that the savvy AS business student might bear in mind as they do their revision.  A particularly useful one is just out from O2…

Update on how 10 small businesses are weathering recession

January was a difficult month for BPL Solicitors, one of the 10 small firms that the BBC website is following throughout the recession. With the practice specialising in property law, it has been particularly affected by the downturn in the housing market. Last month it told staff it will likely have to make some redundancies. HMS Joinery is also dependent on the housing market and so business is falling – its owner Harry Murray says his confidence in the business is only 3 out of 10, down from 4 out of 10 in December. These two businesses are likely to find that the latest housing market figures, to be released later today, will not bring them any relief.

New car sales slump as consumer confidence evaporates

Some significant news from the UK motor trade today confirms that “big-ticket” consumer products are suffering from a sharp fall in demand…