Is The UK Entering A Doom-Loop?

 Switch on the news and all you hear is doom loop.  In this article let's look at what a doom loop is, how it affects us and how we can benefit from it.

What is a Doom Loop

Imagine standing in a hole and trying to dig yourself out.  The more you shovel the deeper the hole gets.

This is the situation governments find themselves in - not just the UK but Japan and some EU countries.

Why?

Governments borrow money to manage the day-to-day services that they provide.  They pay interest on the money with repayments covered through the income they generate with taxes.  The surplus cash is invested into innovation and infrastructure.

When the economy slows, less tax income is generated and the interest rates for borrowing go up making more and more expensive to borrow money.

The government is left with two options - reduce expenditure and/or increase taxes.

Facture in, difficult to control inflation and central banks keeping high interest rates, the economy struggles to find the sweet spot of growth, investment, low inflation and low interest rates.

This creates the loop.  Breaking the loop and creating favourable conditions for an economy to thrive is difficult.

What Triggered This Economic Situation?

Doom loops don't just happen, they are part of a sequence of events that compound over time and create an economic downward spiral.

The current doom loop can be traced right back to 1999 when President Clinton repealled the Glass-Steagall Act - deregulating the banking industry and enabling high risk derivatives.

The timeline reads:

• 1999 - Clinto repeals Glass-Steagall Act, opening up the banking industry
• 2001 - Terrorist Act, Twin Towers catapults Western Worlds into war. Countries borrow heavily to fund it.
• 2008 - Credit Crunch and subseqent recession.  Countries like UK didn't come out of recession until 2014. Heavy borrowing and introduction of Quantitative Easing to provide liquidity.
• 2020 - Pandemic resulted in heavier borrowing and increased Quantitative Easing to support economy
• 2022 - Ukraine War see cost of living expenses increase drastically
• 2024 - Government Budget causes damage to an already fragile economy through: 
• heavy taxation on businesses forcing many to close, lay off staff 
• reduces investment, business growth and reduces tax take. In addition, 
• Government increases spenditure. This forces the government to borrow more at higher rates.  
• Bank of England introduces quantitative tightening
• Billionaires and Millionaires exodus the country
• Share market suffers one of the biggest sell-offs in history

Now everyone is watching and waiting to see if the November 2025 budget can miraculously pull something out the hat and boost the economy.

How To Survive and Thrive In A Doom Loop?

There's no doubt that a Doom Loop can be treacherous for business and investor alike. Surviving when no one is spending is difficult for businesses.  Generating income through investments also has it's problems, but here are some strategies that work time and time again to not only survive but thrive.

Business

Multiple Income Streams is the key here.  While most online businesses will have their niche, introducing multiple income streams will remove the stress if the major income stream fails.

For example - I'm a business and wealth coach.  I offer 1:1 coaching.  In difficult times this tends to dry up because 1:1 coaching is a luxury that gets pushed aside.  So, I offer 3 membership levels ranging from £9.97 through to £197 a month. The focus with the membership models is finding something that fits people's budgets and is a customer retention tool.  I also have a range of business mini-courses and tools that are purchased as one offs.  I have books based on business and investing.  Multiple income streams within my business model.

Investments

Shares - Monthly Dividend Investment Shares provides a boost to income.  Look for ones that traditionally maintain payout even through difficult times along with ETFs and REITs.

Buy-to-Let Property - reduce mortgages and work to remain within the LTV clause. Still acquire property but use options or cash to purchase.

Gold and Silver - put at least 10% of your income into gold and silver as they tend to go up in value while other assets drop.

Crypto - is untested in a doom loop or recession.  Just remember everything you can do in the real world has an equivalent in virtual world of crypto.  But as an untested assets in downturns use just a percentage of your captial to spread the risk.

Intellectual Property - this asset could generate additional income and become more valuable in a doom loop.

Don't Wait, Take Action Now

Preparation and Time are your best allies.  Business and Investments need time to grow and produce the results you need.

On average, there is a recession every decade.  We know how to prepare for a recession.  A doom loop tends to be more a result of political and government mis-management, meaning your business and investment strategies should always have a level of economic risk management involved.

As we wait for the next budget in November, there is still time to take action, restabilize business and investment strategies and be ready for whatever quirks the government throws at you.

For more economy insights visit : Karen Newton, Business and Wealth Strategy

Prefer Audio?

Now you can listen to Karen's analysis on the Business and Wealth Strategy Podcast

A definition of words and phrases can be found in the Main Glossary