The business world seems to agree. We are on our way into – or are already somewhat facing – a stagnated economy and will eventually end up in a recession. Recent statements and research from, amongst others, European Investment Bank, Svenskt Näringsliv, Konjunkturinstitutet and large Swedish multinational companies all point in this direction.
How fast and severe the situation will become is closely linked to, amongst others, the trade war between US and China, the outcome of Brexit and the content of the possible agreement between UK and the European Union. The level of infrastructure investments in each market will also have an influence.
Harder to streamline cost or release working capital
One thing to be sure of is, that with a recession, it will become even harder to streamline cost or to release working capital. This is mainly connected to three variables:
- Demand goes down
- Cost of capital increases
- Access to capital decreases
Swedish (exporting) companies needs to monitor efficiency
Continuous improvement is another important factor for success. At this very moment the Swedish currency is weak compared to important trade currencies such as EUR and USD. Currently, Swedish centric (read: not multinational companies trading already in EUR and USD to a large extent) companies are boosted by a weak SEK and improvement initiatives are not as high up on the agenda. But when the important trade currencies follow their Swedish cousin down, these companies will wake up to a stark reality. Only those who continually focus on improvement will be properly geared for the bad times to come.
Is the glass half-full or half-empty!? The choice is yours.
The effect a stagnation or recession will have on companies is largely decided by the approach they decide to take. Research has shown that companies allowing creativity and aggressiveness more often gain a lot of competitiveness during a recession, as opposed to companies that try to cut cost in general, reduce the overall headcount or put their whole strategy on hold.