Senior Partner, EMEA
Global Consumer Products
Dealing with a ‘Flatlining’ Economy
Shrinking food packets. Shedding business units. Increasing accountability. The checklist goes on.
The UK’s economic news continues to be tough, forcing a change in the way savvy leaders operate. During the month of August, the economy rose an estimated 0.2%, following a fall of 0.6% in July, government data shows. The pattern has persisted all the way back to January 2022, with seesawing gains and contractions of less than 1%. The result is that the British economy is now a mere 1.8% larger than it was before the pandemic.
This lack of growth, along with other factors, has made Britain less attractive to investors. Critics continue to say that Brexit, the country’s exit from the European Union, hasn’t helped. “There’s a hesitation to investing in the UK now because we aren’t in a large trading bloc,” says Tim Manasseh, Korn Ferry’s senior partner, EMEA, for global consumer products. Leaving the EU has also presented other problems. “The supply of labor from elsewhere in the EU dried up, as people who previously were able to come haven’t returned,” he says.
The recent cost-of-living crisis, along with massive increases in interest rates, has hurt the economy as well. “Higher interest rates and higher energy prices are sucking pounds out of people’s pockets,” says Ben Frost, a senior client partner in Korn Ferry’s Products business. He contrasts the current situation with the pandemic period, when the government encouraged Brits to eat in restaurants to boost the economy. “At the moment, people are spending money on stuff that doesn’t create jobs,” he says.
But as usual, Frost says, savvy business leaders have responded by adjusting their offerings—embracing shrinkflation, for instance. “We see smaller food packets in the supermarket to cater to lower levels of disposable income,” he says. Likewise, some companies are making the tough choice of not maintaining high customer-service standards.
Other companies are making major strategic decisions about what their companies will look like in the decades ahead. “Leaders are imagining what is the real source of value in the company—what should be the company’s focus, and what they should get out of,” Manasseh says. He points to multiple life-sciences businesses that are shedding units because they’re no longer key to the new corporate focus.
There’s also a renewed emphasis by company leaders on accountability, Manasseh says. That involves changing corporate culture and re-engaging the workforce. At least in part, it means making sure that tasks get done on time and within the budget. “Many companies are looking at simplifying their operations and introducing greater profit-and-loss accountability,” he says
But change and re-engagement also require employees who are committed to corporate goals. “Having the same people in new boxes doesn’t mean that magic will happen,” Manasseh says. “They have to be invested in the new model, and they have to believe there is a good future ahead.”
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