Thread: Broke Britain - A Happy New Year

This recent article from the Independent d.oes not paint a pretty picture for 2008.
Some of the numbers are staggering.

Some of us may find the tips at the end of the article to be useful



By Martin Hickman, Consumer Affairs Correspondent

Published: 02 January 2008



Debt experts are predicting a record number of personal insolvencies this year as excessive Christmas shopping, rising mortgage payments and soaring food and fuel costs force thousands of people over the financial edge and into bankruptcy.
More than nine million individuals in Britain are now believed to be struggling to pay credit card bills and mortgages, with the average owed by problem debtors hitting £30,000.
In alarming figures to be released tomorrow, the accountancy firm Grant Thornton predicts the total number of personal insolvencies will jump to at least 120,000 this year, almost triple the equivalent figure in 2004, when just under 47,000 people went bankrupt.
Insolvency experts say people have been readily loading large amounts of debt on to credit cards and personal loans, despite the economic slowdown.
High-street shops and online retailers reported higher-than-forecast takings in December, while the new year sales have also been busier than expected. One commentator described the Christmas shopping spree as one last hurrah before a tougher 12 months ahead.
Although the economy is still vibrant and employment plentiful, the supply of cheap and easy credit that has revved the economy for years is being turned off as a result of the sub-prime lending crisis in the United States. Fewer mortgages are being granted to people in Britain with poor credit records. Credit card limits are being lowered and personal loans are becoming harder to obtain.
According to a poll conducted by Uswitch.com in November, 38 per cent of new applicants for credit cards and 19 per cent of applicants for new personal loans were rejected, while 6 per cent have had their credit card limit cut. With food and fuel prices also set to rise in the new year, levels of disposable income are likely to drop, deepening the difficulties of those attempting to repay debts.
Those already in debt will find themselves at the mercy of collection agencies more determined than ever to recoup money for clients. According to one industry journal, the coming crisis means that "debt collection agencies will need to adopt more sophisticated methods in order to deliver value back to their clients".
The latest figures indicate that 23 per cent of people – 9.5 million adults – were finding their current level of debt "unmanageable". Although the Bank of England cut the base rate of interest last month, an estimated 1.4 million people will still have to pay more for their home loans when their fixed-rate deals come to an end this year, costing an extra £150 to £250 a month.
Tomorrow, Grant Thornton will forecast that 10,000 individuals will hit the financial wall each month in 2008, with 28,000 individuals sliding into insolvency in the first quarter. As many as one third of bankruptcies in the first three months of the year will be caused by "excessive Christmas spending".
Mike Gerrard, the head of Grant Thornton's personal insolvency practice, said: "Sadly, many individuals spend up on credit at Christmas and pay no heed to the financial warning bells. Come January, they find themselves in a situation where previous financial woes are compounded by the bills arriving from the festive season and in these situations insolvency becomes the only way out."
Mike Naylor, a personal finance expert at uSwitch.com, remarked: "People have enjoyed easy access to cheap credit for quite some time, but for some, the party really could be over." He said those with a poor credit record would experience a particularly tough time.
In a survey last month, the Bank of England found that more than one fifth of those whose mortgage deals had come to an end last year struggled to meet higher payments.
Experts predict a rise in Individual Voluntary Agreements (IVAs), a less stringent form of bankruptcy, because banks are once again accepting them after quibbling with their terms last year. Bankruptcies are also expected to be more readily accepted by individuals because they have become so commonplace and so their stigma has fallen.
Malcolm Hurlston, the chairman of the Consumer Credit Counselling Service (CCCS), predicted there would be a small rise in IVAs and a "quite substantial" rise in bankruptcies.
When individuals are declared bankrupt their debts are written off, but they are often credit- blacklisted for years and may have difficulty finding a job.
Debt agencies said they had been busy during December, which is usually a quiet time.
On average, people approaching the CCCS have debts of £30,000. About 45 per cent of that is from personal loans, 40 per cent from credit cards and 5 per cent from store cards and other lending. The organisation estimates that 7 per cent of the adult population is experiencing serious debt problems, which would represent about 3.3 million people in the UK.
"Nearly all of them have lost control," said Mr Hurlston. "Some of them can sort their finances out but some of them need some kind of solution, which might be making voluntary payments; it could be IVAs or it might be bankruptcy."
Steady increases in the cost of living are expected to tighten the screw. In only 12 months, Grant Thornton said the cost of filling up a vehicle with unleaded petrol had increased by 16 per cent, which meant the public was having to find an extra £155 a year to fill up the car.
Mr Gerrard said: "Coupled with rapidly increasing gas and electricity prices, which are forecast to jump by more than 10 per cent early this year, it's easy to see how those already struggling to pay off credit, particularly those servicing mortgages, are caving in to the pressure." He warned: "I believe personal insolvency numbers will move forward at a much faster pace than anticipated."
Howard Archer, the chief UK economist at Global Insight, suggested that in general people would have to be more frugal this year. "Household purchasing power is likely to be dented by higher energy and food prices over the coming months, while many home owners face having to re-fix their mortgages at significantly higher rates.
"Furthermore, increasing concerns about the economic outlook are likely to further encourage consumers to tighten their belts," he said.
The British Bankers' Association urged people to check their finances carefully and to get in touch with lenders as soon as they got into difficulty.


How to keep on top of your cash
Five money-managing tips from the British Bankers' Association
* Keep an eye on your spending – check your bank statements;
* Don't ignore the bills – where you can, arrange to pay monthly so you can spread the cost;
* Be careful with the credit card – if you're tempted to overdo it, leave the card at home;
* Start to save, or save a bit more – there are some good offers as banks compete for your cash;
* If you think you are heading for difficult financial times, go and talk to your bank sooner rather than later.

Originally Posted by Troubled

How to keep on top of your cash
Five money-managing tips from the British Bankers' Association

* If you think you are heading for difficult financial times, go and talk to your bank sooner rather than later.

LOL - so that your bank can be at the front of the queue for your assets!

The ongoing credit crises will hopefully teach the US & European populations to become more like the Chinese - save 40% of their earnings.

Easy to save 40% of their earnings when the only thing you can buy is cheap shit made in China. Give 'em a decade or two, they'll be in line.

Originally Posted by Sir Burr

The culture has changed. It used to be that the only consumer items people would go into debt for were big ticket items like house and car. There used to be a stigma attached to being in debt. Now it is expected of you. Paying in full for everything is now considered eccentric.

Agree 100%. Tell someone you are saving up to buy something and they look at you as if you just arrived from Mars.

EDIT: Also, how can people reasonably be expected to repay credit card debt that charges circa 30% interest if they owe these sorts of sums?

Originally Posted by watterinja

Chinese - save 40% of their earnings.

Dunno about that, last I heard the Chinese were taking out personal loans to buy stocks with. People were selling everything in sight just to buy stocks.
Bubblelicious

^ That does seem to be a radical change of character - perhaps the stereotype is changing in the world of 'fast money'.

I've got a feeling this is the tip of a very large iceberg. Which joker still thinks inflation is at 3% give or take? Council tax, fuel, food, mortgage repayments are all up between 10 and 20% in the UK. Salaries are static or at best incresaing at 3% or so. It's hardly surprising folks are running out of money.

My own UK business has slimmed from 100 staff to around 40, with a target to reduce to under 30 within the next 2 months. Most people I know runing SME's here are in trouble. They're either having to refinance homes or other properties to stay afloat or are bailing out altogether. I don't know anyone who's making money here right now.

Even hookers in London are not busy - although this is great news if you wanna haggle a bit.....although you know its getting bad when respectable, hardwording people are having to give up extra curricula shagging to make ends meet.

They say its a recession when your neighbour loses his job, a depression when you lose yours.......it ain't looking clever.

How many more companies are defaullting on tax/VAT payments which is gonna throw the public finances into an even bigger mess? They've already run out of money, and there's gonna be less coming in. I wonder how many struggling retailers are going to just repay directors loans /debentures from casflow received over Christmas and New Year and then pull the plug - shafting the VAT / taxman in the process. The next quarters figures are going to be very interesting.

Those that are looking at refiancing/liquidating asets are looking at a glut of property coming onto the UK market. Estate agents in London are looking at prices down 10%, if you wanna sell more like 15-20%.

I'm fcuked if I wanna stay in this poxy country much longer!

Originally Posted by Zavier38

\My own UK business has slimmed from 100 staff to around 40, with a target to reduce to under 30 within the next 2 months. Most people I know runing SME's here are in trouble.

I'm fcuked if I wanna stay in this poxy country much longer!

You could always relocate to Thailand where despite having a larger population the economy generates only 8% of the wealth of the UK.

Here could employ only about 5 staff in a business and still make enough to run a Benz as you only have to pay them about 40 pence per hour.

30 poms = 300 Thai's, if you are lucky... in terms of business efficiency...

The Benz will be taken by the Thai opposition in a short time, after they shaft you in one form, or other...

Originally Posted by Smeg

Originally Posted by Zavier38

\My own UK business has slimmed from 100 staff to around 40, with a target to reduce to under 30 within the next 2 months. Most people I know runing SME's here are in trouble.

I'm fcuked if I wanna stay in this poxy country much longer!

You could always relocate to Thailand where despite having a larger population the economy generates only 8% of the wealth of the UK.

Here could employ only about 5 staff in a business and still make enough to run a Benz as you only have to pay them about 40 pence per hour.

I've already bought the land. Waiting on building permit. First bloody chance I'm off.

Originally Posted by watterinja

That does seem to be a radical change of character

Indeed, the government there has regulated banks lending/reserves ratios to stop the lending and curb the markets. It working too.

As for UK, its a nice place for a holiday but after Thailand, its just too cold for me to live there.

Originally Posted by Smeg

You could always relocate to Thailand where despite having a larger population the economy generates only 8% of the wealth of the UK.

Here could employ only about 5 staff in a business and still make enough to run a Benz as you only have to pay them about 40 pence per hour.

So, GDP = Wealth. You must work for the UN

^ I don't think he does Willy, He's just a thicko.

Originally Posted by Sir Burr

It used to be that the only consumer items people would go into debt for were big ticket items like house and car. There used to be a stigma attached to being in debt. Now it is expected of you. Paying in full for everything is now considered eccentric.

Actually there is a reason for that, interest rates are cheap, actually so cheap, that it doesn't make economic sense to spend cash, as the banks get "owned" with the cheap rates, thanks to high inflation (the real one, not the fake "official" ones)

That said, this is true for long term loans, but short term loans are still quite expensive. How do the banks do it ? not sure. With long term rates lower than "true" inflation, I guess they must use those as a marketing cost and incentive to put more people into debt with higher rates loans. Bascially it's your special of the day at the supermarket, you are going to lose money on one item advertised at very low price, but make up for it with the volume on the other items at normal price.

At the end of the day, the banks still get owned because people will default. But they don't care, because central banks are always there to bail them out.

^ Some good points.

I always purchase stuff on hire-purchase type deals (TV's and the like). My wife has one of those 'Easy Buy' cards (at least I think that's what it is called?) and it makes perfect sense, they usually offer 0% interest over 6mths or something like that so why not?

^ there is the convenience of it, and the leverage from such convenience. Consumers are very quick to see those bargains and make the jump.

It's fine as long as you can afford those small items, it becomes a problem for the poors who use those cards are their only source of cash.

Originally Posted by Butterfly

It's fine as long as you can afford those small items, it becomes a problem for the poors who use those cards are their only source of cash

Very much a convenience for us, why drop 80k on a TV in one hit for example when you can spread it over 6mths with no charge.

But what you say is very true also. The credit Co's themselves don't help much I think, seems like they'll give terms to pretty much anyone who asks sometimes.

Originally Posted by AntRobertson

But what you say is very true also. The credit Co's themselves don't help much I think, seems like they'll give terms to pretty much anyone who asks sometimes.

my secretary kept borrowing from them, 3 times or 4 times as much as her monthly salary, she couldn't pay back, ever. The interest fines and silly late charges put the effective interest rates at more than 30% per annum.

Originally Posted by AntRobertson

why drop 80k on a TV

why pay 80k for a tv when there is nothing on it worth watching??

Originally Posted by ChiangMai noon

why pay 80k for a tv when there is nothing on it worth watching??

There is when you also have DSTV from South Africa!

80 k on a bloody tv.

you should be shot.

^ Actually it was closer to 90k, 87 or sumfing.

So if you're going to shoot me just make sure you don't do it near the expensive bloody TV. Try not to get blood on it either.

^ Reds dont leave much stain through...