How is the credit crunch affecting you?
Many UK households are already beginning to feel the effects of the credit crunch with 49% of British consumers concerned about facing financial problems over the next year. There has been a significant increase in the number of applications for debt management plans and individual voluntary arrangements as continued rising costs leaves more and more families struggling to live within their income and efforts to reduce their credit card debts and loan costs are unsuccessful.
Some people are already trying to maintain a debt free lifestyle by cutting back on spending on the high street with figures released for June showing the biggest one-month drop in sales since 1986. The rising cost of food, household bills and fuel coupled with the slump in the housing market has been blamed for the dip. Household energy bills were predicted to rise by 15 to 20% in September with further increases early next year which will add to the financial pressures experienced by many families already. Already, British Gas has said it is raising gas prices by a record 35% and electricity prices by 9% with immediate effect blaming soaring wholesale energy prices. The move comes just a few days after a rival company put up gas prices by 22% and electricity prices by 17% with other companies expected to follow suit. (http://news.bbc.co.uk/1/hi/business/7533389.stm)
It is reported that a third of all consumers already spend 80% of their monthly salary on bills with many trying to finance their lifestyle by taking out payday loans, which can be attract exorbitant rates of interest, or using their credit cards to withdraw money from cash machines. The average annual percentage rate (APR) imposed by credit card companies for not clearing balances built up by ATM now stands at 25.3% with sum being as high as 46%. In addition to this, nearly a third of credit card holders have been hit by APR increases on their existing credit cards in the past 12 months with some customers finding they are paying up to 34.9%.
With the summer holidays well and truly underway more than 2.5 million British adults will get into debt which is twice as high as last summer as 16% believe that a holiday is so important that spending will only be considered once they return home. Latest research indicates that the run-up to Christmas will see increasing debt strains for UK households with up to 49% of British consumers concerned about facing financial problems over the next few years.
Nick Sturgeon is a small business owner who has benefitted from the experiences of success, failure and financial recovery. The author of “Small Business BIG Profit” published by FT Prentice Hall, Nick writes and speaks from the heart about Risk, Reward and the Power of Personal Enterprise.
For more information about the process and an introduction to a debt management planner, send an email to nick@smallbusinessbigprofit.co.uk with your details and situation.
