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Sunday, 6 November 2016

Before it’s happened it’s already apparent the Brexit is “self harming”, but we still have to go through with it?

Experts warn of imminent fall in living standards due to sharp fall in value of pound after referendum
Notes and coins on a payslip.
Families will face increasing financial pressure as inflation and household debts rise while wages are squeezed. Photograph: Nick Ansell/PA
UK households should brace themselves for a combination of rising inflation, low pay and increased debt that will squeeze living standards next year and push more people into financial difficulty, experts have warned.Higher inflation, weak wage growth and rising levels of consumer debt are expected to weigh on households next year as the economy adjusts to the post-referendum environment.Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “The spectre of significantly higher inflation is a real concern. Many households have still not recovered from the last big squeeze on incomes in the aftermath of the financial crisis. The risk is that this new pressure on household budgets could tip many more people into financial difficulty.“As a society we need to prepare for what could be a significant increase in problem debt in the years ahead.”Economists at the National Institute of Economic and Social Research are predicting inflation will rise from a current rate of 1% to almost 4% in 2017, as the sharp fall in the value of the pound since the Brexit vote makes imports more expensive.
Wage growth on the other hand is expected to be weaker, as firms seek to control costs amid slowing economic growth and heightened uncertainty.
There are also signs that household debt is returning to highs not seen since the financial crisis. The British Bankers’ Association has said that consumer credit is growing at the fastest rate in almost a decade, as record low interest rates fuel demand for personal loans and credit cards.
Gillian Guy, chief executive of Citizens Advice, said the rise in borrowing could lead to difficulties. “More people are turning to credit … While this borrowing might be manageable now, a sudden change in circumstances could lead to debt problems.”
Peter Tutton, head of policy at debt charity StepChange, said many people were only just getting over the last period of falling real wages, when inflation outpaced pay growth following the 2008 financial crisis.
He said: “A further squeeze on household incomes, made worse by the freeze on benefit uprating, will leave even more households struggling. With over seven million people already using credit to pay for everyday essentials, there is a real danger of more falling into severe problem debt.”
Attention is now turning to Philip Hammond’s maiden autumn statement on 23 November. The chancellor has already signalled that he will ease the pace of austerity set in motion by his predecessor, George Osborne.
Frances O’Grady, general secretary of the TUC, said: “Our research found that the last wage squeeze left more families struggling to make ends meet without turning to borrowing, with over 3 million households facing problem debt. Rising consumer credit figures raise concerns that we’ll see more families borrowing to get by.
“The chancellor should address these fears in the autumn statement, and take action to boost jobs and wages. That means new investment in infrastructure such as roads, rail, green energy and homes, and increases in the national minimum wage.”
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