Threats Posed by Rising Unemployment

With the UK now officially in recession for the first time since 1991 and the global economy worsening, it is becoming increasingly difficult for job seekers to find suitable work. The unemployment rate rose to 6.4% between October and December 2008, representing a quarterly increase of 0.4%.

A Labour Force Survey (LFS) for the fourth quarter of 2008 showed that 29.4 million people were working, although this figure was down by 45,000 on the quarter. The Confederation of British Industry (CBI) believes that unemployment is set to reach a peak of 3.1 million before the economy begins to recover.

There is also strong evidence to suggest that the number of applications for any available vacancies is increasing dramatically. Leading accountancy firm, Deloitte Touche Tohmatsu, has reported a 34% increase in applications for its graduate positions. The Edinburgh office of Deloitte Touche Tohmatsu has experienced the highest number of applications, showing a phenomenal 59% increase.

The number of people applying for university places is also growing dramatically. Students are currently pessimistic regarding job opportunities, which has resulted in an alarming jump in student numbers. UCAS figures showed that there were 29,549 applications for university places in January 2009, which is 5.1% higher than just 12 months earlier. The University of Dundee saw an increase in student applications of 16.5%. These new statistics do raise concern as to if there will be work for these newly qualified people in 3 years time when they graduate. Whilst student debt isn't as troublesome as personal debt, it is a bad way to start out in life.

A monthly survey of recruitment consultants in January 2009 by leading business advisor, KPMG, showed that the average salary for new work placements fell from 42 to 40.3 in December 2008. This figure is measured against an index where 50.0 represents no change. Falling incomes for those re-entering the job market may be helping to control inflation, but it is making it harder for families to cover household bills and service escalating levels of personal debt.

According to a report by Credit Action, the average unsecured household debt, including credit cards, unsecured loans and personal overdrafts, in the UK stands at £9,633. This figure increases to £21,750 when secured loans and mortgages are taken into account. Of the 11.7 million households that currently have mortgages, the average amount owed is £103,903. The total interest paid on personal debt in the UK was a staggering £76.2 billion in the past 12 months alone.

Servicing personal debt has proven impossible for many families. County Court Judgments in England and Wales have risen by 17.4% to 223,519 in quarter 3 of 2008. This represents the highest level of County Court Judgements since the first quarter of 2007. This is equivalent to 2,430 people receiving a County Court Judgement every day.

Money problems have resulted in rising numbers of consumers turning to debt solutions, such as Individual Voluntary Arrangement, personal bankruptcy and debt management plans. The Insolvency Service reported that there were 29,444 personal insolvencies in the fourth quarter of 2008 in England and Wales. This represents an increase of 18.5% on the same period 12 months earlier.

Many consumers have taken on substantial debt over the past decade and will feel the direct effects of this as the global economy continues to deteriorate. Involuntary redundancy, decreasing employment opportunities and falling pay rates have led to millions of families finding it virtually impossible to service personal debts

Useful links: IVA | Debt Help | Debt Soluations