How the unexpected GDP reduction will impact UK businesses
The pound sterling weakened against the US dollar yesterday (10 June), to below $1.27, following the Office for National Statistics (ONS) releasing worse-than-expected figures revealing that the UK economy contracted by 0.4 percent in April – the biggest contraction in three years. The decrease in Gross Domestic Product (GDP) is being attributed to the dramatic fall in car production and continued uncertainty ahead of the country’s planned exit from the European Union this coming October.
Robert Douglas, Europe planning director for Adaptive Insights, a Workday company, thinks the decrease in GDP and subsequent fall of the pound sterling leaves companies across the UK with no choice but to adapt their financial planning for the upcoming quarters. “While it’s part and parcel for any responsible business to be able to respond to, and adjust, its forecast in light of these unexpected changes,” he says, “companies that are not yet set up for continuous planning will likely struggle.”
With uncertainties surrounding the UK’s exit of the European Union not looking to disappear anytime soon, Douglas means it will become increasingly challenging for finance and management teams to devise accurate plans and make business-critical decisions in an agile and timely manner. This, he says, will depend on the move towards an active approach to planning and forecasting, that will depend on leveraging technology that take businesses beyond manual spreadsheets
“While many companies are comfortable with traditional planning methods, these processes make the adjustment of financial plans a tough and arduous job. Businesses need to be agile in today’s world and that requires the ability to plan in real-time, with current data from across the organisation. With a continuous planning process versus a rigid, annual planning process, businesses are able to make better decisions faster. And, by running ‘what if’ scenarios, companies can prepare for a variety of market and economic changes, such as the impact the fall of the pound sterling could have on a business – a must-have for UK companies operating during volatile times.”