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Finance General Rescue, Restructuring & Recovery Turnaround

The forgotten squeeze on incomes

We hear a lot from the unions about a squeeze on incomes for the blue collar workers they represent but there is another, large group of people who have suffered a much bigger drop in income.
Many middle management positions have gone altogether since the 2008 Great Recession began and older people, especially, who were made redundant from these positions have found it difficult to find other jobs.
According to research by the Resolution Foundation the loss of these middle management posts has contributed to a fall in real wages.
Many of these former managers have turned to self employment, setting up as consultants or outsourcing their skills to companies as needed and this has led to an estimated 20% reduction in their income although I believe the reduction is much greater.
The consequences of this are still to come.  While initially many have been cushioned by redundancy pay, reclaims from their bank due to mis-sold income protection and other insurance products, and low interest rates sooner or later the money will run out.
Having lost out on their occupational pensions, how many of these newly self employed are able to put money aside for their pensions?   How many will be able to repay their mortgages, let alone service them when interest rates rise?
Eventually we will face a serious Welfare payments crisis as more people reach retirement age without adequate provisions, not to mention that there will need to be a substantial correction to house prices, which are over-valued by up to 30% in our view.

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Business Development & Marketing Cash Flow & Forecasting General Rescue, Restructuring & Recovery Turnaround

Two steps forward and one step back is the new normal

“It seems that every time an upward trend in sales volumes seems to be emerge it’s quickly snuffed out. While disappointing, trades data are a reminder that despite some positive upward indicators, the ongoing squeeze on incomes means there’s a limit to how quickly growth can pick up”.
This reported comment from Simon Wells, HSBC’s chief UK economist, in the London E. Standard may seem to be a statement of the obvious but it bears repeating in a world where every tiny short term uptick is seized on as evidence of recovery from the global economic crisis.
Irrespective of who is to blame we should remember that high price inflation and minimal salary inflation plus the current uncertainty about employment have meant a real squeeze on incomes. Both businesses and consumers remain focused on paying down debt.
While confidence might rise this can only translate into a rise in credit and in people’s ability to service debts.
We are also in the midst of a global economic rebalancing that is shifting power and influence away from the so-called developed world to other economic centres and this is likely to take a long time to stabilise.
Every business, and not only the retail sector, that is looking at restructuring for growth needs to bear all this in mind whether it is considering developing exports or its home market.  It will be about focus on the longer term, about real innovation, about providing value for money and about close attention to customer service to achieve success and growth.