Zero growth will trigger an exodus of companies

The matter is settled then. Taxes will keep on rising. Welfare payments will keep on going upwards. Businesses will have to pay more and more to the Government, and so will the rich, now defined as anyone making more than £50,000 a year even if they have a mortgage to pay and children to look after on that income. In the wake of Jeremy Hunt and Rishi Sunak’s Autumn Statement, and with Labour committed to the same policies, Britain has chosen to become a zero-growth economy.

Like Italy, or Japan, whole decades will go by with no increase in total output. For companies that is going to be a big change. They will no longer be able to rely on expanding demand to keep sales moving forward or to provide new opportunities. Instead, they will have to adapt to permanent stagnation.

How? By focusing on the “value” end of the market, given that no one will be able to afford any luxuries; by making sure their operations are ruthlessly lean, since any fat will be fatal; and by concentrating on exports, since most other economies will be expanding faster than ours. Zero-growth economies are not much fun. Nobody makes a lot of money, there are few new businesses and the brightest young people, understandably, choose to make their careers elsewhere. But they struggle on – and British companies, or those that remain, will have to work out a way to cope.

The Autumn Statement may have gone down reasonably well with the financial markets. It may have just about stabilised the Conservative Party at the 20pc level in the opinion polls. And it may allow the Prime Minister to stagger on until the next election. That is something. No one seems to be even trying to pretend, however, that it will do anything to lift growth, or get the economy moving again.

Instead, Britain is committed to its highest level of taxation in 50 years, with most of the money spent on an unreformed health service and the triple lock for pensioners, with taxes rising forever and with businesses, entrepreneurs and savers subjected to endless raids on their “unearned income”.

It is a recipe for stagnation. Italy’s GDP is no higher than it was 20 years ago, and under the current policies Britain’s total output will be no higher in 2042 than it is this year (and Italy, remember, has a thriving black economy to help everyone get by). It is a dismal outlook, but one that business must adapt to. How should they do that? Here are three places to start.

First, move to the value end of the market. If your strategy team is not already familiar with the phrase “accessible pricing” they will need to learn quickly. Squeezed, highly taxed consumers, with falling real incomes year after year, will be acutely budget conscious and constantly shopping around for a better deal. We have already seen Aldi and Lidl report booming sales as customers appreciate their sharper prices, while the likes of Greggs, JD Wetherspoon and easyJet will find it easier to win new customers.

Whether it is in utilities, travel, consumer goods or leisure, it will be the companies that offer the best value that will just about manage to stay afloat over the next decade, and the ones that are really good at it may even be able to grow their sales. By contrast, anyone stranded at the top end of the market, with high prices for a mediocre brand – otherwise known as the M&S formula – will find themselves in big trouble.

Next, relentlessly squeeze costs. In a stagnant, zero-growth economy, a business will have to be brutally efficient just to survive from one year to the next. There won’t be much space for worklife balance, wellness days, or four-day weeks, no matter how much the staff might push for those kinds of benefits. The workforce will have to be kept to a bare minimum. The suppliers will have to be willing to work for wafer-thin margins. The balance sheet will have to work as hard as possible and the overheads will have to be trimmed anyway they can be.

Finally, expand exports. Over the next decade, Britain might not be a growing market but other countries will still be expanding. The Italian economy doesn’t ever get any bigger, but Ferrari is still a growing business (the share price is up by 117pc over the past five years) and so is the drinks manufacturer Campari (up by 55pc over the same period). Japan may be stagnant, but Uniqlo’s smart, fast-fashion has still rolled out around the world, while Sony and Toyota are every bit as powerful as they always were. The important British companies of the next decade will forget about the domestic market and focus on the global one. The likes of Dyson, JCB and Ineos are already there, and plenty more will start to follow them as they figure out that Britain is hardly a great place to trade anymore.

Of course, it is far easier to run a business in an expanding economy. People have money to spend and new opportunities are emerging all the time. In a stagnant one, it is always a grind. Still, that is what we have chosen, and there does not appear to be much chance of it changing any time soon. Zero growth doesn’t have to be a disaster. It is tough, but societies can muddle through. But companies will have to adapt and change – otherwise it will kill them.

‘In a stagnant economy, a business will have to be brutally efficient just to survive’