Will Businesses Lay Off Workers in 2023?

Businesses are under special pressure to find funding at the moment, as the economic outlook continues to look bleak for not only the private sector, but the nation altogether.

With costs rising across the board, businesses more than ever need to consider crucial methods for cutting costs.

A Disastrous Economy

The need for cost-cutting arises from the uniquely dire economic circumstance in which the UK currently finds itself. A year of high inflation has wreaked havoc on both consumer markets and business costs, with energy in particular seeing a stark rise in price year-on-year.

Businesses, which do not enjoy the same price-cap protections as domestic households, have seen their energy overheads increase as much as tenfold in some scenarios.

The problem was exacerbated by a disastrous economic proposal put forward by short-lived Prime Minister and Chancellor Liz Truss and Kwasi Kwarteng respectively. Their October ‘Mini-Budget’ sought to stimulate growth, while the Bank of England was actively attempting to stymie growth.

The result was market instability, steeper inflation, and higher rates of interest altogether – rendering credit and debt more expensive than before.

Key Methods for Cutting Costs

But in what ways do businesses respond to such economic stressors?

As the cost of borrowing grows ever higher, alongside the cost of raw materials, manufacture, logistics and even imports, it is of crucial importance that businesses seek unique ways to curb their spending.

The first port of call for many businesses is their supply network. Difficult times are as good a time as any to renegotiate with suppliers, or to seek out new suppliers entirely. For trade businesses, finding a new raw material wholesaler might unearth helpful medium-term savings.

With energy being one of the leading cost burdens of the current economic situation, mitigating energy usage is another strong point of attack for saving money. Business premises might start with behavioural change, such as the turning off devices and heating systems after working hours. For industrial businesses, energy-efficient investments are the better option.

As a last resort, there is the matter of staffing. In times of economic downturn, individual businesses will experience reduced success. This might justify targeted redundancies, to limit labour costs and recoup money in the medium term.

But this can harm long-term prospects if not done carefully.

What Does the Future Hold?

These are all relatively short-term changes a business can make to weather an economic storm. They have long-term impacts, and do not necessarily need to be reversed, but they may not be enough if the economic landscape does not change for the better soon.

However, there is evidence to suggest that 2023 will be just as difficult, if not more so for businesses. Goldman Sachs predicts a significant recession event in 2023, being a period of growth decline that sees consumers spending less and less. This could be existentially bad for businesses unable to pivot to new income streams or contain their own costs.