The financial crisis of the last decade now seems like a distant memory, overtaken in the media headlines by the (many) political changes of the last few years, and of course the UK’s impending departure from the European Union.
Yet the truth is that the world economy – and indeed the UK – is still struggling to free itself of the chains of those rather scary years in the early part of this century. The Financial Crisis of 2007/8 was heavily influenced by two particular dynamics:
- A personal, corporate, and national reliance on debt (much of which was not properly assessed when given)
- Relatively modest (at least in historical terms) increases to the cost of living, which in turn resulted in many not being able to afford to pay-back the monies that had been borrowed
The crisis could however have been much worse than it actually was. The ability to cut interest rates to historic lows eased many of the pressures, as did the creation of new money (a.k.a. Quantitative Easing) which most of the central banks did in very large numbers indeed.
These measures helped the world and UK economy significantly at the time, and for years thereafter. Yet those lifeboats have now been used. Should another debt crisis present itself it will be even more difficult for the Bank of England (BoE) and our politicians to mitigate the impact of any problems.
It follows that the BoE warnings today against a continuation in the sharp rise of debt should be taken seriously by all. Car loans, personal loans and credit card balance transfers have soared by 10% over the last year alone. And this at a time when pay awards continue to be rather low.
And then there are the “unknowns” of Brexit. High on the list of concerns here would be the possible increases in the cost of living that might be sparked by tariffs on imported products if a suitable deal with the EU is not achieved.
Put these two items together and it will be apparent that another debt crisis could yet lie ahead. The storm clouds may be building, yet there is still time for the UK to take action to avert any possible tempest. Employers can do their bit here by helping their workers understand the basics of financial decision making, and introducing Financial Education courses and tools in the workplace is an important first step in this ambition.
Such tools are intended to help workers better understand the dynamics of spending, saving, and debt, and will empower each individual to make more informed decisions. This can only be a good thing for the individual and their families, and with fewer money worries employees will be able to better focus on their job. This in turn should lead to an improvement in productivity which is a major win for both the sponsoring employer and the wider UK economy.
So we would urge many more employers to look again at this important issue. For more information on our services around Financial Education in the workplace, please speak to your usual Jelf Consultant in the first instance.
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