How to survive a recession 1: Lessons from the past

Owen Malton of DSW Debt Advisory looks back at previous economic downturns to see how they compare with today

How to survive a recession 1: Lessons from the past


With economic storm clouds gathering, many economists believe the UK will enter a recession in the year ahead. It is a scary thought – particularly if you are under 40 as you will probably not have experienced trading in similar market conditions before.

Having started my career in the 80s, I have been through a number of recessions and in my next article I will be sharing some of the tips I have learned on how to survive. But first let’s look back at previous recessions, the similarities and differences from today and what we can learn from these.



Following the original Winter of Discontent, the Conservatives led by Margaret Thatcher had come to power in 1979 and set about trying to contain inflation which peaked at 18% the following year. They raised interest rates and taxes, cut government spending and restricted the money supply.

Demand slumped and the high cost of borrowing, together with the rise in the Sterling, damaged exports and sent companies good and bad to the wall. Unemployment rose to over 3 million and within a few years, the UK had lost around 20% of its manufacturing industry.

I started my career in the wake of the recession. While inflation is high today, unlike then the labour market is tight with jobs exceeding the number of available workers, although unemployment is likely to rise if consumer demand collapses.

Instead of manufacturing, the industries suffering today are retail and leisure though we are also seeing some job losses in the big tech firms. And while the 80s marked the decline of the trades unions, we are now seeing a resurgence as workers demand wage rises to keep up with rising prices.



In 1990 the inflationary impact resulting from the oil price shock – when the price rose following the Iraq invasion of Kuwait in 1990 – coincided with the end of the cold war with huge decreases in defence spending.

Interest rates went up in response to inflation, which was 9.5% in 1990, and there was a loss of consumer and business confidence with everyone battening down the hatches. Again, a key difference is that unemployment is low though we have other factors playing out today.

The pandemic has resulted in global supply chain issues and lower productivity as countries emerge from Covid and huge government bail-outs. The sting in the tail was Russia’s invasion of Ukraine and the resultant increase in energy prices and inflation, and of course, Brexit and poor UK productivity have to be thrown in.



Unlike today the so-called ‘Great Recession’ – though I am not sure what was great about it – was driven by the US subprime mortgage market. Mortgages were spliced and diced and sold on to other investors and, when the housing bubble burst, banks worldwide were left holding trillions of dollars in worthless investments which caused the credit crunch.

Another difference between then and now was that interest rates and inflation were low and an injection of adrenalin in the form of quantitative easing was required to get economies going.

The aftermath was a tightening of regulatory controls on banks which had to repair their balance sheets. With the collapse in bank lending, SMEs in particular struggled to access finance. However as alternative funders began to enter the market, wider availability of credit helped to stimulate markets and prices.

Unlike then, funding is still available but as we enter a recession, lenders are being more selective and the price will increase to reflect the increased risk. Borrowers must be able to bring their funders along with them so communication and information are key. Given the demands on a funder’s time, businesses are advised to employ the services of a professional debt advisor to guide them through this process.


Read Owen’s tips on managing a downturn in the second part of our series next week.