Almost half of UK and US firms predict that their respective country will experience a recession this year.
This is according to research conducted by Atomik Research and published by trade finance provider Stenn, which surveyed 706 senior staff members at medium to large businesses in the UK, US, and China.
46% of UK businesses and 45% of US ones expect that a recession will occur in their economy this year, but the Chinese economy is predicted to maintain a 6-7% growth.
This comes amidst geo-political tensions between the US and Iran, as well as the US-China trade war, which saw tariffs imposed on billions of dollars’ worth of goods.
Brexit uncertainty was cited as the number one risk factor for UK businesses in 2020, with the cost of Brexit expected to reach £200m this year.
This is followed by environmental concerns, with The New Economics Foundation saying that investing in green projects could help boost the UK economy.
In the US, geopolitical tension, environmental concerns, and changing consumer behaviour were named as the biggest threats to business.
Recession fears strong amongst US and UK businesses
33% of UK firms think the UK economy will shrink in 2020, most likely by 1-3%. “Long-term uncertainty, mounting business costs and a global economic slowdown” meant that the UK economy stagnated at the end of 2019.
Last year, think tank The Resolution Foundation warned that a possible recession could be made worse due to the fact that interest rates in the UK are low at 0.75%, and that a lack of preparation could make it “unnecessarily painful”.
Furthermore, a third of UK and US firms expect to see a global recession this year, but 93% of Chinese companies will believe their economy will grow, with a quarter expected growth of 4-5%.
Dr. Kerstin Braun, President of Stenn Group, said:
“2019 was weaker than expected and the stakes are only higher for the year ahead. Trump has been playing games with global trade and while the Chinese are confident their economy will grow as it moves beyond the US-China trade war, it’s a very different story in the UK and US.
“Boris Johnson’s election result provided some much-needed solidity the UK has been craving and with Brexit confirmed to go ahead, businesses can begin to plan for the future. But the prolonged uncertainty has been battling the UK economy and many businesses are concerned Brexit could cause the economy to shrink in 2020. It’s vital UK firms start investing again as they exit Brexit limbo. This is critical for long-term growth. If current political and economic uncertainties ease, we could see a gradual revival in activity over the course of the year, likely by 1 or 2%.
“At the same time, the US is exposed to the effects of Trump’s unpredictable trade actions. While some fundamentals like employment are good, there are enough economic red flags to signal weakness in the second half of 2020. For example, corporate and government debt levels are high and personal loans are up more than 10% from a year ago. This makes the economy vulnerable to shocks and dependent on the Fed to keep interest rates low.
“What’s most worrisome is global trade. The capricious US-China tariff war, which started as a security and tech war, has turned into political theatre at the expense of real businesses, while trade in and out of the UK after Brexit is still under threat. The uncertainty impacts short-term margins and long-term investment plans for companies with international supply chains. With the agreement on January 15th, one part of the trade war might come to an end but the tech war is likely to continue with no solution in sight.”