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The UK recession – a financial adviser’s view

HL financial adviser Ian Jones gives his view on the UK recession, why it might not be as bad as it seems and what you can do to get through it.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Ian Jones
Financial Adviser

Published on 18 August 2020

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

The UK is in its first technical recession since 2009.

The economy shrank 20.4% between April and June, compared with the first three months of the year. While that doesn’t sound great, it’s not all doom and gloom.

We’ve taken a look at why it might not be as bad as it seems and what investors can do to get through it.

This article isn’t personal advice. All investments rise as well as fall in value so you could get back less than you invest. If you’re unsure, please ask for advice.

It might not be as bad as the headlines sound

A recession sounds grim.

But the news only confirmed what many of us expected to happen. Closing down the vast majority of businesses will cause fairly dire consequences for the short-term economy.

It’s also worth remembering these statistics look at the past, not the future. These events have already happened. And following the re-opening of some areas of the economy in June, we’ve started to see signs of improvement.

For example, the economy grew by 8.7% in June. This growth could continue as more and more businesses re-open, although there are no guarantees.

So where do you stand in all of this?

It’s easy to get caught up in the doom and gloom right now. Money worries are one of the biggest contributors to stress. Job losses, or worse still losing loved ones, can cause a lot of pain and hardship.

The media play an important role in this. Bad news sells newspapers. Everywhere you turn, you’re faced with a merry-go-round of negativity. It’s dizzying to say the least. Relying on the media to inform your decisions about your finances isn’t usually a recipe for success.

I’ve said many times before, focus on what you can control – you and your own financial planning. You can’t control anything else. Any attempt to do so will cause further confusion and a feeling of helplessness.

I can’t stress enough the value of keeping a cool head when others are losing theirs. After all, it pays to have a diversified portfolio and invest for the long term.

How to get through a recession

Trying to predict future events and the impact on your investments is the stuff of fantasy. The renowned economist John Kenneth Galbraith once said “we have two classes of forecasters: those who don’t know — and those who don’t know they don’t know”. We’re not ashamed to say we sit firmly in the former of the two camps.

Truth is, there are no facts about the future, only about the past.

And if you drive your car looking through the rear-view mirror, it won’t be long before you have an accident.

So here are some questions to ask yourself to help you navigate the coming months and years:

How healthy are your finances? It’s important to have sufficient contingency funds that are easily accessible to help meet planned and unplanned expenditures in the short term. We usually recommend having 3-6 months expenses set aside as an emergency fund.
Will your income cover your needs? Are you saving enough for the future or spending too much today? If there have been changes to your financial circumstances, you might need to revisit your financial planning and budgeting.
What does this mean for the value of your investments? If your thoughts about the future have changed, or lower investment income is affecting your lifestyle, you should review your investments and revisit your strategy.

If you’re satisfied with your answers, then perhaps you’re on the right tracks already. But, if you’re struggling to come to terms with the current situation and are feeling a little lost, a financial adviser can help.

Extra help with financial advice

Each of our clients have different needs and circumstances. The information in this article is only a guide and if you choose to take advice your adviser will get into the details of your goals to give you a personalised plan.

A good next step is to talk to our advisory helpdesk.

There’s nothing to lose. This free, no obligation call will help you understand:

What help and support you can get without taking advice
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How financial advice works, including the benefits and costs

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Our helpdesk won’t give you personalised advice. But if you decide to move forward an adviser will be in touch within two working days to discuss things further.

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