It is now apparent that the expected return to normalcy following the end of the pandemic failed to materialize. The exact opposite became confirmed as the world was plunged into an even more complex and challenging environment. Indeed, 2022 was full of unexpected problems and adverse economic conditions ranging from shipping disruptions, signs of a looming recession, soaring inflation, and more. Tiny industry sector has been left unscathed. If the massive layoffs at the start of 2023 are an indication, the rest of the year may be as unpredictable and difficult to navigate successfully as the previous one.
Companies that fail to adjust accordingly may struggle to stay afloat, a fact seen in the number of bankruptcies declared last year. Some projections estimate that in 2023 the percentage of companies going under could get even higher. Naturally, one category of business organizations feeling the biggest impact is SMEs (small and medium-sized enterprises).
These organizations typically need help securing investments and loans at favorable terms. Suppose your company is struggling, and you need more confidence in tackling what lies ahead. One possible choice is to get help from professional insolvency practitioners. They will analyze the circumstances of the business and its external factors and ensure that the right action is chosen.
Negative factors pressuring companies
Several major factors are pushing inefficient companies out of the market – pressure from inflation, general monetary tightening, the crisis in the energy supply, etc. First, the high energy prices are driving energy bills ever upward, eating away at the revenues posted by businesses. The European countries are feeling the impact of pricier energy the most. Some experts believe that even at the current energy price, most companies outside the financial sector will struggle to remain profitable.
A common survival tactic is to pass a portion of the increased costs to consumers, but doing so will almost invariably bring a decline in demand. Other factors especially relevant at the start of 2023 and throughout the first half of the year are expected to be the interest rate increases likely to be implemented by many regulators and the increased pressure caused by the accelerating wages.
How is the UK doing?
According to released statistics, bankruptcies in the UK are going down after reaching 5629 companies in the second quarter of 2022. However, the number of companies going out of business is still almost double the average of 3656 between 1975 and 2022 and worryingly close to the absolute peak of reported bankruptcies of 6950 posted in the midst of the global economic crisis back in 2008.
To remain stable, the UK. Will have to deal with most of the same issues as the rest of the world. The country will need to closely monitor its employment rates, as a stable labor market will have a calming effect while people deal with energy and food prices. Inflation rates will also need to be controlled, and many expect the Bank of England to push the base interest rate to a peak of 4.5%.
A wave of layoffs sweeps the tech sector
After a period of rapid growth and an enthusiastic hiring spree to support it, the tech sector is now operating in a radically different reality. Demand for tech products has slowed and, coupled with the generally worse economic conditions, has led to tens of thousands of workers being laid off. Nearly all tech giants have announced such plans – Alphabet, the parent company of Google, plans to cut 12,000 jobs, Microsoft is eliminating 10,000 jobs, and Salesforce is laying off around 10% of its workforce, or around 8,000 people.
After nearly doubling its workforce during the pandemic, from around 798K at the end of 2019 to 1.6 million in 2021, Amazon has also decided to reduce its corporate jobs by approximately 6% (18 000 jobs). Besides the tech industry, job cutting is also happening across the board. The US retail chain Bed Bath & Beyond is struggling to escape bankruptcy and, as part of its efforts to reduce costs, will also carry out an unspecified number of layoffs.
Apart from some major positive shifts occurring in 2023, countries will need to expand public and fiscal support, as both are essential measures to stop a potential wave of bankruptcies. Such measures are crucial in the European countries feeling the greatest impact of the ongoing energy crisis.
