In October 2022, the Fraser of Allander Institute confirmed Scotland was likely to enter a recession.

Although this verified what many expected, the Institute has forecast that this recession will persist not only into the beginning of this year, but throughout 2023, before a return to growth in 2024.

In Scotland, general business confidence and optimism is trending downwards. For businesses that have been focused on “just getting through” over the past few years, the prospect of now tackling a recession presents an unwelcome challenge.

But that is exactly why we must think long term. While it may seem counter-intuitive, an eye on recovery and the future beyond recession is critical to how effectively businesses navigate the coming months.

The depth of a recession, as well as its length, will vary depending on the type and severity of the economic factors which influence its onset. These same factors will also dictate the amount of time it takes for the economy to recover.

Currently, the economy is characterised by inflation which is at its highest level in a generation, with interest rates having risen sharply, while unemployment sits at record lows.

High inflation is somewhat reminiscent of the economy during the 1970s. During that time, inflation hit highs while growth stalled, spurring economists to coin the term, “stagflation”.

However, the economy in the 1970s was also characterised by high unemployment and low debt, in contrast to our current situation.

Current debt levels are more comparable to the economy during 2008, though the rate of inflation during 2008 sat at relatively low levels by comparison to now.

Turkish-American economist and NYU professor Nouriel Roubini shared his views on the impending recession, positing that our next recession will be a mixture of the recessions experienced in the 1970s and 2008, thanks to these similarities. Ultimately, he suggests that this recession will come to a head as a “stagflationary debt crisis”.

Though the picture is far from rosy, looking back to previous recessions is not only useful in suggesting the type of recession we may see, but also to inform the strategies companies can deploy.

Economists at the Harvard Business Review have previously encouraged businesses to strike a balance between behaving aggressively and defensively during a recession, and spending is one area where business need to find that sweet spot between preserving funds and constricting the business.

For example, the recession in 1973-75 was brought on by an energy crisis and high oil prices. At the time, many businesses looked to cut marketing spend with the view that it was inessential.

For the auto industry, a category directly impacted by the oil shortages as the cost of driving increased, this was especially pertinent. But Toyota took a different view, choosing to continue investment in a longer-term marketing strategy established within the US. A year after the recession, it became the top imported car maker in the US, overtaking more established brands at the time such as Volkswagen.

This will have been a gamble for the automaker – a move requiring long-termism, seeing beyond the immediate challenges of the recession. But the willingness to spend more aggressively in certain areas helped Toyota find that “sweet spot” that Harvard Business Review economists have described as the key.

It is far more natural to focus on what lies immediately in front of us than what might be coming around the corner. But stretching the gaze will be one of the most reliable means of mitigating impacts from this recession in the long term.

The job of business leaders is to ensure that we don’t miss opportunities through focusing only on the risks.

Chris Harte is CEO at independent Scottish law firm Morton Fraser