What can be done now insolvency figures have reached an all time high?
November 6, 2009 | Leave a Comment
Official figures relased by the UK government for this week relating to the third quarter of the year show insolvancy figures to have reached an all time high. This news should hardly surprise us considering the numbers of people who were cheerfully swaping zero interest credit card deals as a means of managing debt and avoiding the inevitable. The credit crunch has a noosehold on this approach as more and more people try to borrow their way out of debt. Add to that the pressure of recession led redundancies and reduced household income and insolvancies are bound to increase.
So what is the extent of insolvancies now in the UK?
In the three months to he end of September, the Insolvancy Service repos that 35,242 people became insolvent. This represnts a 7% increase on the previous quarter and 28% on a year ago. In the same time period, just over 4500 businesses went into liquidation. However, despite these high figures, there is evidence of these statistics slowing down compared to the increases of the second quarter of the year.
What options are open to me if I might be close to insolvancy?
Dealing with insolvancy means examining your situation on several levels:
1. It may be that, by changing how you spend your money, that you can regain control of the situation and avoid insolvancy. Living on a Dime is a great little set of inexpensive books that take the reader through the steps to settle debts, manage money and to live and cook frugally. The tips you’ll pick up from this book will more than cover its cost in just a few days if you put them into action.
2. If you have developed spending patterns that are drawing you deeper into debt with accumulating posessions and enjoying holidays etc then are you left with that hollow feeling of despair that not being able to pay for it all brings? If this rings bells then Christian Financial Freedom offers sound and reliable advice to liberate you from these behaviours.
3. If you are really feeling that insolvancy is a real risk, the acclaimed book Eliminate Debt Fast without Bancruptcy or Debt Consolidation is well worth a read. Nobody wants the humiliation of insolvancy proceedings so to have the guide that will take you though the highly effective and discreet steps of negotiating and implementing debt resolution as quickly as possible is a great asset.
These are the three key resources that Credit Crunch Helpdesk recommends to its readers for assisting to manage finances and resolve debt in the recession and its aftermath.
Bankruptcy for Blockbusters?
March 3, 2009 | Leave a Comment
Another key High Street name, Blockbuster, is the latest casualty of the credit crunch and recession. Whilst, understandably, unwilling to comment, it appears that Blockbusters is exploring bankruptcy.
Edward Woo, Wedbush Morgan Securities, said: “Blockbuster has been facing some liquidity issues for a while now and this is one of the options they have. It’s not a great one.
“I don’t think it’s going to result in a liquidation like Circuit City, but if you’re doing business with them, it’s not a great thing,” he said.
Like many key retail businesses in the current financial crisis (Woolworths being another notable example), Blockbusters has been trying to re-invent itself in order to reduce the negative impact of online dvd and video game sales upon their business. With many online rental schemes available in the U.S and U.K it has become harder to encourage as many customers to come out to choose and return their films when they can now rely on the convenience of a postal rental service at an often lower cost.
Beating businesses down on price is the name of the game for consumers now faced with greater choices…especially during a recession. Let’s hope that Blockbusters find an alternative to bankruptcy as a way forward out of their liquidity issues.
Unemployment levels rise close to 2 million
February 23, 2009 | 1 Comment
The U.K unemployment figures reached 1.97 million this week. This came as a bit of a surprise for many who believed it would pass the 2 million mark. They are still, however, the highest unemployment levels since labour came to power in 1997.
The scary thing is that business bosses predict that unemployment will top the 3 million figure by the time this financial crisis and recession are over. Experts have been describing the current employment and business situation as a depression this week.
Even major cash and carry stores such as Makro have closed stores this week. When places geared towards saving money for their customers are closing down you just know that there is trouble afoot is they are not making enough sales.
Meanwhile, job vacancies have fallen by 75,000 to just over 500,000 making the coming months very bleak indeed.
Global banking crisis deepening further
January 15, 2009 | Leave a Comment
Well, who’s enjoying the 2% bank interest rates? They seem to be at an all time low (even though the U.S and Japan are “enjoying” 0% interest rates) but there still seems to be a crisis over whether money will be loaned to medium and small businesses in order to get tham over the cash flow crisis that the recession and credit crunch have brought.
A big part of the problem of the global banking crisis deepening further is that global inter-bank lending has ground to an all time low and that was an important part of the availability to funds to lend to consumers and businesses. There also seems to be a lot of debate in the U.K as to who should shoulder the risk for future bad lending decisions…the banks or the government. If the risk is to be shared, the public are concerned that tax payers will be carrying the can for bad lending decisions by the banks.
In the U.S, JP Morgan Chase have announced a 76% drop in quarterly profits due to writing off bad debts and re-directing funds to buffering themselves against the worst of the global financial crisis. Mitsubishi UFJ Financial Group (Japan) have meanwhile reported $3.2 billion loss on its securities portfolio in the third quarter of its financial year ….mainly due to the challenges being faced in the Japanese stock market. Their situations seems typical of major financial institutions globally….so it seems hardly surprising that international inter-bank lending has ground to an all time slow.
Unemployment and hopes for a V shaped recession
December 30, 2008 | Leave a Comment
In recent months, the financial crisis has made job security for huge swathes of workers a thing of the past. In the months of June to August 2008 (inclusive) there was the biggest increase in unemployment since the middle of the last recession in 19991. It was also highly ominous that there was the biggest slide in the numbers of people in jobs since 1993.
Over this Christmas season we have seen further business closures. The cheapness of goods in the shops leading up to Christmas beg the question, will any more of the familiar retailers in the malls be going into liquidation in the New Year? Nearly 2 million people were unemployed in the U.K last week.
How far will the fingers of unemployment be reaching?
In the build up to Christmas, job losses in the financial, housing and service sectors have been the most obvious to happen. Alongside this it has become clear that economic hardship has taken its toll on the retail outlets as well as manufacturing. Even exporters, who were expected to benefit from the falling value of the pound, have not enjoyed the boost they hoped for as potential buyers abroad cut back on their own expenditure.
How do our unemployment levels compare with abroad?
U.K unemployment is still a lot lower than our competitors abroad with, for example, 5.7% compared to Germany’s 7.3% unemployment. With U.K workers being perceived as more flexible in recent years, this stands the U.K in good stead for recovery. The hope is that we will have a short sharp V shaped (rather than U shaped) recession and will come out of it quickly…. although predicting the outcome of this unique financial crisis is very tricky to do as we are all, globally, in uncharted territory.
Government to underwrite loans to businesses?
December 15, 2008 | Leave a Comment
David Cameron (Conservative leader in the U.K) has, again, commented on the problem of banks being unwilling to lend to businesses in the current economic climate. The problem is that the banks’ fingers have been so badly burned by the credit crunch and resulting financial crisis that they are scared stiff of being caught out again – especially when the full impact of all that has happened in the economy has yet to reveal itself.
Cameron argues that intervention is needed to kick-start the process of lending to businesses and that the only way to give the banks the confidence to do this is for the government to act as guarantors on appropriate business loans thereby taking away the risk from banks.
He has argued that a national loan guarantee was “a massive state intervention to help the banks lend again.” This seems like a great idea…however, with a government up to its neck in debt as a result of spending, taxation and bank bailout decisions, where is the money going to come from if called on for bad debts.
I am with Cameron when he called for “new rules and incentives to create a new culture of responsibility” which need to be enforced by the regulating body. However, it seems like a high risk plan (if recession is leading to the fall of many businesses) for a highly in debt government to act as guarantor to high risk loans.
I know that some risk taking has been necessary to intervene in the economic downturn – but surely it needs to be low risk?
Credit crunch rise insurance claims
December 7, 2008 | Leave a Comment
Why would the credit crunch raise insurance claims?
It is feasible that, in the wake of the credit crunch and the start of a recession that insurance claims will rise. As people planned holidays then find they have either lost thier job or are nolonger able to pay for it using credit, there is potentially a rise in fraudulent travel insurance claims.
The Observer Newspaper recently quoted Direct Line Insurance and the Absolute Fraud Management (AFM) service as expecting a rash of claims from unscrupulous policy holders. Of course, this problem will not only be reflected in people trying to recoup what they have paid on failed holiday plans….a rise in household policy claims as a means for unscrupulous people to raise funds claiming loss of expensive items is also expected.
How will the rise in insurance claims affect customers?
Chris Price at Direct Line added: “It is generally said that during an economic downturn insurers see an increase of fraudulent claims on their books.” As a result, we can expect an increase in the time takes by insurers over legitimate claims as everybody’s insurance claims will be carefully scrutinised and authenticated. Customers seeming vague or nervy in during telephone claims will be expecting a face to face interview…otherwise premiums could end up going sky high to compensate for fraudulant claims.
For the rest of us this may simply mean that we have longer to wait for genuine claims to be settled. The current financial crisis also means that customers are more likely to claim for loss or damage to lower value items making the claims process slow down due to claims volume.
Automobile Industry Affected by Credit Crunch and recession
December 5, 2008 | Leave a Comment
Falling car sales leading to manufacturing cutbacks in the automobile industry
I suppose it stands to reason that as credit becomes less easily available, those big ticket items like new automobiles are going to be one of the first industries to suffer. The credit crunch and recession seem to be feeding off eachother now. In the U.S, the U.K and Australia there have been announcements about cut backs in automobile manufacturing. The result? Redundancies / shorter working hours, less income available to spend in the economy and retail outlets suffer further.
So what is the fallout of cutbacks in the automobile industry (amongst others)?
I don’t know about you but I have really noticed (when out and about) how grim peoples’ expressions are. There is a lot of pressure on most households’ income ….Thanksgiving, Christmas, school recess (an needing to entertain the kids)….all these factors are a pressure financially at the best of times….let alone when credit bills are hitting the doormat and there is uncertainty about how many more paycheks might be coming in if the recession bites hard.
So how do we move forwards from here? When can we feel safe to spend again? Public perception is that the VAT reduction in the U.K is not expected to have much impact on the spending of many households …the main benefit might be on heating bills (but any saving is quickly offset by rising household fuel costs). Banks are enjoying lower interest rates but passing only a fraction of them on to the customers. Everyone is scared.
Well, back to the Christmas preparations…this year it all seems much more balanced…a bit of giving but having the space to remember the reason for the season.
“Woollies” – that great high street institution – in receivership. I can’t believe it!
November 27, 2008 | 1 Comment
I don’t know about you, but I was shocked yesterday by the announcement that Woolworths was going into liquidation with an enormous £385 million of debts that have been prevented from getting any larger and have forced them to look at their options.
Everywhere I went this morning, people were talking about it. Generations have bought their pick and mix and bargain toys there as well as those weird and wonderful household items that you just didn’t seem to be able to find anywhere else. I salute you Woolworths for all that you have been over the years. You will be a sadly missed presence in our town centres!
As the news was announced last night, there were other casualties of the credit crunch fallout looking like they were heading the same way – MFI, Dolcis, Ethel Austin to name but a few AND THIS IS BEFORE CHRISTMAS!!!! If businesses that have weathered out many a recession are going to the wall now, where will it all end as the post Christmas slump in spending comes around.
I don’t know about you but I think the enormity of this global financial crisis is starting to sink in. Yes. I have been watching the news. I know about the extent of the financial crisis. It is the hidden depths of its impact that is starting to reveal itself….and, as I meet people in the North of England who have been laid off from different jobs more than once in the last few months, I don’t think I’m alone in wondering where it will all end.
Can the Credit crunch be reversed by central banks?
November 23, 2008 | Leave a Comment
The last few weeks have seen a whole lot of negotiation by governments with central banks in the hope that the huge cash injections that were eventually forthcoming would avert the worst effects of the credit crunch. Wold leaders have been discussing together how they can work together to save the world from the horror that the subprime crisis has revealed.
How can central banks reduce the impact of the credit crunch?
The federal government and their opposites across the world have been pumping more money into the financial markets in hope that this will allow funds to move more freely so easing the credit crunch. Basically, this allows more banks to borrow more money more cheaply. These lower borrowing rates will also be secured against lower value collateral.
Will the central banks be sucessful in reversing the credit crunch?
What these arguments for federal cash injections into the banking system are ignoring is that the money is being used to try to patch up the injuries to the system caused by bad lending decisions. It now seems unlikely that a major recession can be avoided. I also suspect that inter-bank and bank-customer trust has been so badly impaired that we will never quite go back to the “good old days” of freely available credit quickly supplied. Nor should we.
The economic backdrop in the U.S, the U.K and Europe is appalling and worsening too. Suddenly all the lenders are a bit skittish and yesterday’s good risks for lending are now not looking so good a risk…especially with possible redundancies around the corner as the recession deepens.
This means that, whilst there is already a lot of bad debt out there, there will be more bad debt looming as jobs get lost and spending is cut back. Even other banks will take a long time to look like a good credit risk as nobody seems to know what dark secrets lurk on eachother’s balance sheets. It will take at least a year before that kind of information becomes publically declared and so the decision to lend to other banks can be made based upon transparently declared facts.
Everyone is starting to hoard money ready for any surprises in their own financial affairs…consumers, banks and businesses. I wouldn’t hold your breath that these cash injections are going to be made available to customers too quickly. All the banks have had a major scare and need time to catch their breath, see the impact upon their own financial stability, work out what on earth happened and try not to do it again.
