How the Credit Crunch is Affecting the Workforce in the UK

Every day the news reports another company that is laying off thousands of workers or one that is shutting its doors permanently. There are very few news reports that do not have some mention of the “global credit crunch” and while we are getting tired of the phrase, it is one that is likely to be around for quite some time yet.

The downturn in the economy actually started in the US in the housing market in 2007 and since then it has affected just about every country of the world. It has wreaked havoc on the banking, financial and investment markets in a major way and has changed the way in which anyone can obtain credit. The worst effect of the credit crunch has been in the huge numbers of job losses, which have affected the UK just as much as other parts of the world.

No one doubted that the credit crunch would have an effect on banks and financial institutions when it first made the news, but no one expected the extent of which it is today. It has had an adverse affect on the financial sector with huge losses in what were once profitable businesses and banks have discovered that their sources of funding have essentially dried up.

This has resulted in job losses across the board and this was only the beginning. As more and more companies found themselves in financial difficulty and lenders tightening the conditions under which they approved loans, they were forced to downsize or close, putting many people out of work.

The housing market has also taken a huge hit during the global credit crunch. Only a year or so ago house sold at high prices and many homeowners borrowed heavily on the equity they had built up in their homes.

The huge drop in house prices on the real estate market means that many homeowners with home equity loans or lines of credit are now finding themselves in a position of negative equity. This means that the price for which they can sell their home is not enough for them to even be able to pay off what they owe on the home, let alone pay off other outstanding debts.

Even though house prices and interest rates have fallen to a new low, this does not mean that more people are buying. The stringent lending conditions mean that fewer people are able to qualify for a mortgage. Estate agencies have had to close putting real estate agents out of work as a result of this downturn.

All aspects of the financial sector of the economy have sustained setbacks. Loans, credit cards and other forms of finance have been affected making it more and more difficult for the ordinary consumer to obtain credit when they desperately need it.

This in turn has affected the amount of money that consumers have available to spend outside of paying their bills and looking after essential household expenses. For this reason, businesses with very little connection to the financial sector have suffered tremendous losses.

Consumers have cut back on their spending habits and are becoming more fiscal in looking after their finances. Manufacturing sectors, retail outlets and the service industry has been affected as a result with consumers buying only what they absolutely need. The big name stores are losing money and are not making as much profit as they have been accustomed to making and therefore are downsizing in the numbers of staff members they have on the payroll.

It is not just the large businesses that are suffering from the credit crunch. Many small businesses have had to declare bankruptcy and there have been huge job cuts in the manufacturing and service sectors of the economy.

One recent report from the Federation of Small Businesses says that it is time for the government to stop putting emphasis on trying to lower interest rates and start looking for ways to stimulate the economy so that people can go back to work and start earning a wage once again. This includes focusing instead on finding ways for businesses to find access to much-needed funds to ease the struggles they are experiencing in an effort to retain their workers and keep their doors open.

The recession is now in full swing and is likely to worsen during 2009. This means that more and more people will most certainly lose their jobs in all sectors. Those who do still have a job are watching their money more closely and making an effort to pat off as much of their debt as possible.

Until the economy starts to rebound and the banks start to relax their lending restrictions, there is very little that consumers can do but wait out the recession. No one knows for sure when the end will come and many experts are predicting that it will be some time before any improvements can be noted.