As Registry Trust’s Data Analyst, I am always looking out for changes in our society that will impact the economy, and in turn, indebtedness. We know that the ‘hard-Brexit’ that Britain has opted for (in which a deal has been struck that introduces a completely new set of trade and other agreements) is likely to sway the costs of our day-to-day activities, and as part of our mission to provide ‘public data for the public good’ on monetary judgments in the UK we must consider the effect that potentially increased living costs will have on household finances and debt in different geographical areas.
This blog discusses likely regional changes to household finances and the wider economy. Unfortunately, the picture looks bleak. It is therefore vital that debts are repaid where possible before finances become even tighter, which will in turn impact creditworthiness.
But first, a quick look at 2020’s regional and local authority level personal debt levels. The maps below show the number of Count Court Judgments (CCJs) in the UK for 2020:
Local Authority breakdown of 2020 judgments
Regional breakdown of 2020 judgments
This illustrates the areas hardest hit by the ‘first wave’ of economic fallout from the pandemic.
First, the expected regional effects of a hard-Brexit.
A London School of Economics article entitled ‘Briefing: Industry and the regional effects of a no-deal Brexit’ forecasted regional disparities in the effects of a no-deal Brexit but the effects of a hard-Brexit are likely to be similar on the economy and household finances.
The National Institute of Economic and Social Research (NIESR) believes all areas of the UK are set to be poorer after leaving the EU (average GDP 5-6% lower in the long run), attributed mainly to increased cost and reduced efficiency of international trade. (See this report.)
North Eastern Scotland’s reliance on the oil industry through EU trade, and other Scottish regions reliance on European trade due to their close geographical location (East Anglia, and East and West Sussex) make them particularly susceptible to production loss. As shown on the maps, cases of indebtedness in these regions last year were not high. Nevertheless, these regions must prepare for change.
NIESR also believes that the reduced incomes of residents will reduce profits made from tax to HM Treasury. This is likely to be countered by public spending reductions, which are expected to particularly impact Yorkshire and Wales, due to their reliance on the public sector. Unfortunately, both in 2020 and historically, these regions are characterised by already high levels of indebtedness. A previous study conducted by Registry Trust predicts Wales and Yorkshire will also suffer worse economically from the effects of COVID-19 than their regional counterparts. In fact, the study indicated that the regions predicted to fare worst post-COVID, were the same regions that declined heaviest after the 2008 Financial Crash. Those areas with high reliance on the private sector, e.g. London, will find it easier to avoid these cuts.
NIESR forecasted that the regions which be financially impacted the least will be the Scottish Highlands and Islands, Cumbria and North West. This is excellent news for the North West, which has already been devastated by the highest number of COVID related deaths and highest number of CCJ debt records from March to October 2020.
Now to focus on household level finances.
A Times article on ‘Assessing the economic implications of coronavirus and Brexit’, states a hard-Brexit is likely to have the harshest effect on the household economy of all Brexit routes. Over 10 years, if the systems and processes in place at the moment remain the same, household income per capita is expected to decrease by £1,000. The negative impacts on productivity that are predicted to accompany a hard-Brexit show income per capita to decrease by £2,500 over 10 years.
As the process of transporting the materials used to maintain the home (gas, water, electricity) from abroad becomes less efficient, the cost of household energy is also expected to increase. As is the cost of household staples, including oranges from Spain (12%) and drinking glasses from Poland (10%) (see this Guardian article). It is probable that the cost of car repair will also rise due to the increased cost of importing car parts.
Now for some advice.
Coupled with the disastrous impact coronavirus has had on the household economy, it is expected that a greater number of individuals will be pushed into a state of indebtedness.
Martin Lewis, the Money Saving Expert, advises us to concentrate on our own personal finances, rather than the economy as a whole. One piece of advice from Martin is to “ensure you've the cheapest mortgage and the top savings accounts and do a money makeover” in preparation for turbulent times to come.
From our point of view at the Registry Trust, which maintains the Register of Judgments, Orders, and Fines, in the UK & Ireland, we believe that paying off CCJ debts that may already be in place will be vital to ensure ‘financial fitness’ and creditworthiness ahead of further economic shocks. It is then important to notify the courts of this payment to satisfy the judgment and remove it from the Register and your credit file. You can check if you or anybody you are concerned about has a judgment using our website www.trustonline.org.uk.
If you live in a financially susceptible region as highlighted above, we advise taking extra precautions when applying for a loan. These precautions could include ensuring you can pay back the interest rate and enquiring if this interest rate could increase.
I hope this blog has provided insight into what could be on the horizon; allowing time to prepare and implement any changes that could protect you from reduced financial security. This insight could also help key stakeholders to plan ahead for where financial support and debt advice capacity will be most needed. Looking to the longer term, implementing financial education/capability programmes in the hardest hit areas will also be key.
Our public website Trust Online has a bank of ‘Help Topics’ with answers to common questions about CCJ debt, including how to check for and deal with it before it becomes a problem.
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