Soft-landing into the Toughest Recession Since the 1950s

Business advisor, Claire Trachet – CEO and Co-founder of Trachet – discusses the slow coming recession and the effects it will have on start-up funding in the near future.

Soft-landing into the Toughest Recession Since the 1950s
Soft-landing into the Toughest Recession Since the 1950s

Recent reports predict the UK’s current course of low growth and high inflation – otherwise known as “Stagflation” – has now evolved into an impending recession, according to the Guardian. The extreme squeeze on living standards – the worst since the 1950s – and has resulted in consumers becoming far less willing to float the retail arena, with the corporate arena showing signs of equal reticence for new investments. Business advisor, Claire Trachet – CEO of Trachet – says “Every indicator suggests we’re parachuting into a recession, the question now is – how deep will it be?”. For the UK SME sector – which accounts for half of the turnover in the UK private sector – this means a significant strain on financial resources as scaling to survive becomes the modus operandi, as opposed to previously intended growth focused trajectories.

Amidst rising inflation rates, higher energy prices, a falling exchange rate and a cost-of-living crisis – investment houses have been forced to dig deeper to support incumbent investees as opposed to new entrants onto the scale-up scene. As such, access to a flood of fast finance has begun its slow descent. To add context to the trajectory, landmark national research from the business advisory, Trachet, found that 47% of Gen Z Brits and 39% of Millennials stated If they were to start a business, they’d be looking to procure investment to facilitate rapid growth compared to just 24% of their Gen X counterparts, illustrating a generational shift in behaviour for the new wave of entrepreneurs.

However, the motivation to secure a speedy scale has evidently hit an economic brick wall as the ill-effects of a double decade of turbulence take hold. New research from CrunchBase found that 50% of start-ups that reach series A funding fail to raise their next round, with 88.7% of those failing to successfully exit their business, revealing the high risk associated with investing in start-ups. As a magnitude of UK businesses relies on this type of investment to grow and scale, the VC pullback means significant strain will trickle down to the UK economy.

Claire Trachet – CEO and Co-founder of Trachet 

Business advisor, Claire Trachet, CEO & Founder of Trachet comments on the VC pullback of 2022:

“Venture capital tends to work as a reactive market, each investor depends on the next stage (either a subsequent round of financing or an exit) for their short term success – usually every 16-18 months. As raising the next stage becomes less accessible, the market response is to hold back investment activity to avoid having more derelict investments. In the current bear market, it will take a few months for the VC pullback to happen,  post-IPO to seed funding.”