The UK economy is in a strange place with a combination of good and bad news. As a nation, we seem to standing in the cold at a bus stop, waiting for the number 11 to Economic Recovery. Unfortunately, no one in our queue has any idea when this bus will arrive, or how long the journey might take. In contrast, the economies of China, India and South America are powering ahead, they are already on the road and know where they are going.
We have all been told that things will have to get worse in Britain, certainly in terms of both taxes and job losses, before our economic recovery might arrive. However, the mood of the nation is subdued. The optimism that somehow things would be sorted and our economy back on the road again, have quietly faded. This has been brought about by the realisation that the cut backs and measures to tackle our debt burden were only talked about last year. Now the much discussed cuts are being implemented.
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Factors affecting the national mood make sombre reading. International affairs have taken a turn for the worse with the Japanese earthquake and tsunami threatening to set back the world economy. Political upheaval in the Middle East has pushed up the price of fuel still further.
Closer to home, the Chartered Institute of Personnel and Development study of employers found the number that intended to make staff redundant were at their highest since 2004 when its survey began. Four out of ten organisations plan making people redundant before April this year. When combined with redundancies already announced in the public sector, this is the strongest indication that there will be a sharp rise in unemployment.
UK unemployment rose by 49,000 and stabilised just short of 2.5 million in the three months to the end of November 2010 (Office for National Statistics). In January 2011 it increased again to the highest level since 1994 to 2.54 million. So people in work are beginning to wonder how long their jobs will be safe.
The Government were hoping that economic activity in 2011 would create a demand for more jobs in the private sector. Unfortunately the reality is quite different. The Chartered Institute of Personnel and Development policy advisor Gerwyn Davies indicated the first few months of 2011 were a "quarter of reckoning" for the jobs market and the recent recovery would go into reverse. He said it was encouraging that employment in the private sector was expected to increase, but despite this, the institute believed that the overall number unemployed would keep going up until 2012.
Just when we hear such gloom and doom, despite the recession, UK home repossession fell by 24% in 2010. This reported by the Council of Mortgage Lenders. They also said that the number of people in arrears by 2.5% or more of their outstanding loans also fell last year, by 13% to 169,600.
The continued low level of interest rates has helped many home owners to maintain payments despite being in financial difficulties. However, arrears and repossessions may rise this year as the number of people facing payment pressures is likely to increase if interest rates rise. There is a general acceptance among economists that UK interest rates will go up during 2011, it is only a question of when. Meanwhile most people are feeling squeezed financially, especially with the rising cost of food and fuel as well as the increase in VAT adding to their pain. Far more money has been taken out of the average family budget than pay increases have put back in.
Provided they stay in work, most people can cope, but their resources are being stretched. Increasingly it becomes impossible for them to save and families become vulnerable to any change in circumstances. Those in this position realise that they would soon be plunged into financial difficulties if, say, a wage earner lost their job. For them Unemployment Insurance can offer a lifeline. Typically it pays out £1000 to £1,500 per month for up to a year if the policyholder is unable to work due to accident sickness or unemployment. Premiums vary, but this level of benefit is usually available for about £40 to £50 per month.
Those under 40 years of age who have a good employment history can expect to pay much less. Their business is fought over by the highly competitive on-line Unemployment Insurance specialists, often with premiums the equivalent of just £5 per week. For people waiting in the queue for the UK Economic Recovery bus to arrive, Unemployment Insurance can be a great financial umbrella, especially as the economic weather in 2011 has just taken a turn for the worse.
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