Talking Point  

Small and mid-caps to show resilience in face of recession

Small and mid-caps to show resilience in face of recession
(credit: Ian Forsyth/Bloomberg)

The UK is set to enter a deep recession as consumers reign in their spending, but according to Abby Glennie, deputy head of smaller companies at abrdn, not all consumer-exposed businesses are going to be hit as some have models that will allow them to survive.

Additionally, smaller companies have the agility required to adapt quickly to changing consumer behaviour, while those with great management teams have strategies to survive, thrive and win market share in tougher times. 

Glennie said: “Soaring inflation, rising interest rates, the UK already showing signs of recession and a global recession looming – it’s no surprise that consumers are reining in their spending. Looking beyond the headlines though, there’s a chance that some companies may nevertheless grow while consumers get smarter with their spending.

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“The two main areas where consumers are looking to cut costs are in their food and energy bills. In the past 12 months, food prices have risen by over 14 per cent and energy costs have almost doubled.”

She pointed to the likes of Greggs and Telecom Plus as examples of businesses whose models can adapt in the current economic climate.

Greggs - known for its cost-conscious snacks, treats and hot meals, she said was likely to keep its loyal fanbase and might attract new customers during a downturn, offering food at an affordable price point compared against other retailers.

Meanwhile, Telecom Plus is a company that may benefit from consumers’ desire to lower energy costs. Under the Utility Warehouse brand, the business has seen accelerating growth as a record number of UK households join up. 

The more services a customer takes, the higher the savings, and bill management is simplified by only dealing with one provider.