North Wales Plagued by Debt Woes and Recession Troubles

Due to the mounting recession, businesses in North Wales have been shedding jobs at an alarming rate as they try to batten down the hatches and secure their bottom line. The effects on job seekers have been disturbing, with more than 60,000 citizens finding their way to the Citizen’s Advice Bureau of North Wales over the course of 2009, up more than 15,000 from last years numbers. These people seek help due to not only joblessness, but ever rising levels of truly severe debt.

In the first quarter of 2009, new figures show that an astounding 84% rise in redundancy enquiries has occurred. This shocking figure correspond with numbers released by professionals offering Individual Voluntary Arrangement help, many of whom have seen nearly 40% increase in applications for an IVA. Mortgage arrears and fuel debt are combining to push many towards the losing of their homes with agencies struggling to adjust to the sheer volume of requests for help.

The closings of Eaton Electric in Holyhead and smelting plant Anglesey Aluminum have generated job vacancies of more than a thousand lost positions. More factories closing and less manufacturing activity means jobs in North Wales are disappearing faster than new jobs can be lured into the area. This job loss phenomenon is placing more and more individuals at risk for not only losing their property, but having to head straight for bankruptcy as their debt continues to grow.

First Decade of Millennium Draws to Close as Boom & Bust Cycles Examined

The growth of the economy during the first ten years of the 2000’s has proved rocky indeed not only for the UK, but the entire world. This decade started out with a bust and is proving to be ending with an even more impactful bust, according to financial analysts. The UK’s current £178 billion deficit is not a good sign to any eyes, especially those belonging to global financial experts. Economists have proven themselves wrong, banks have been utterly humiliated and the government itself is still in steep trouble if it is not able to pull things out of the fire according to ratings agencies around the globe.

The core problem is that the boom cycles were fueled by debt. That is, debt was taken on in massive quantities as a wager against better times ahead that never have quite come into effect to quite the same scale that was hoped for. Booms that could not be sustained lead to excessive consumer spending and the decade shows that more UK citizens than ever before have faced bankruptcy with many attempting an IVA as their only way out. While these solutions have worked for consumers, it is a telling truth that the statistics are so high now as we approach 2010 with record numbers of UK residents bearing a burden of debt that would have been unthinkable only a few short decades ago.

While Britain’s Gordon Brown helped to avoid a major financial tragedy during the Dot Com Bubble Burst, the moment the panic passed taxes were lowered and ‘investing’ (ie, spending of tax money) increased in the hopes that further economic growth could be found. Even though internet companies did not end up tanking the British economy, today we sit on the brink of an impending economic contraction that is estimated to be nearly 5%, a record not exceeded since before World War II.

Perhaps the worst part is that the UK itself is not the only nation in trouble now. Worldwide, national economies are finding themselves in severe debt. In the East, certain nations have managed to stave off severe debt and actually grow their economies, but in the West, the forecasts are bleak at best. The promising middle years of this decade have done little more than encourage consumers to max credit cards and store cards to what closes in on obscene levels. As a result, consumer specific debt has been accrued at incredible rates, leaving many the worse for the wear as lending institutions sell their debt to unsavoury collections agencies that cause havoc for those debtors left holding the bag.

As manufacturing and other base level economic activities have shifted to lesser developed nations, the UK and the US have experienced a serious accumulation of debt paired with a drop in available jobs for their citizens. While no one can be expected to accurately predict coming events, analysts remain certain that the trouble is not over and continue to endorse solutions such as the IVA or a solid debt management plan for consumers staggering under the burden of severe debt that remains a reflection of their nation’s tendencies.

UK Citizens Urged to Protect Their Portfolios in 2010

The growing national debt of Britain is causing major concern, both at home and abroad as more experts continue to point out the fact that the government is playing a dicey game with debt. While gilts (government debt) have been the traditional means of bailing the country out in the past, today it appears that veteran investors are turning their backs on such investments, potentially causing the government to veer towards even greater troubles than the already colossal £178 billion deficit that the UK faces.

Since gilts are a primary fundraising tool, it could imply severe future damage to the economy should investors remain sceptical of their viability as solid investments. This would push the gilts towards lower prices and higher yields, not a positive thing for the economy. Since ratings agencies may downgrade the British economy in coming months, investors remain especially flighty and prone to placing their money elsewhere. This could lead to further dips in the stock market, unsettling a national economy already teetering at a precarious balance.

Since this economic dip could affect bonds, stocks and even property investments, analysts are advising extreme caution. With so many in debt trouble already, the number of people seeking debt management programmes is on the rise and those entering into an IVA are expected to be joining a very crowded list of people who are quite understandably struggling in the current economy.

Protecting one’s assets is proving to be a critical step to guard against a rough 2010, particularly the first half of the year when the economy will see a serious post holiday drop. Sterling, despite it’s nearly 10 percent rise in 2009 is expected to slip so if investors wait they are likely to find good buying opportunities. Shares remain unstable, but investing experts suggest that investments are best made at the beginning of the year rather than waiting since the last half of 2010 is foreseen to be something of a downward progression for stocks. Housing and property prices should also be sliding, so if investors wait, they will be able to spring upon solid bargains towards the middle of the coming year.

Experts Say UK Could Face Tidal Wave of Bankruptcies as Economy Falters

Financial advisors are foretelling of a coming situation where the number of companies closing in on bankruptcies and in need of emergency financing could reach record levels – up to twenty times the number of companies in similar circumstances today. As banks clamp down on lending and interest raise drift ever upwards, liquid capital is becoming far more difficult for companies to gain access to.

While banks are currently handling companies in a delicate way to preserve their image as resources of the public, things could change drastically in the coming months. While interest rates may be at record lows now, any change, even small changes over time, could push companies into more dangerous waters where costs can quickly spiral out of control. The cheap money available for the last few months has encouraged companies in trouble to borrow while rates are low against fears of an inevitable rise in interest rates. If they fail to handle this debt extremely well, once interest rates begin their ascent, this costs will shoot up, making the debt much more difficult for the company to manage.

Experts insist that if the Bank of England is not careful about when it raises interest rates, it could upset the fragile economic growth that is now starting to take hold. While smaller businesses may well flourish in the current environment, some analysts put the number of companies worth between £10 to £200 million and owned by UK banks, at two to two and half thousand. Those companies all have more debt than they could be liquidated for.

Plenty of investors will be flocking to these underfunded, debt-laden companies in an effort to purchase what are known as turnaround companies. These are companies that might be near the grave, financially speaking, but with the right investments and some re-structuring, often return to profitable, sound companies.

Some investors hold Britain’s economy itself to be worthy of the turnaround status, viewing the nation’s economy as under extremely poor financial management and in need of a new team to turn things back around.

Chancellor Accused of Hiding £60 Billion in Interest on UK Debt

Standing before the Treasury Select Committee, a cross-party group of UK politicians, Chancellor Alistair Darling was grilled about why he had not published the interest cost estimates for Britain’s record setting national debt. The committee’s eldest Tory member, Michael Fallon, directly asked Darling why he had chosen to obscure the fact that the annual interest accumulated on the debt would reach £60 billion in just four years.

Darling, for his part, responded that he had not concealed the numbers of the interest on the UK’s £178 billion deficit in his Pre-Budget Report. He told an outraged Fallon that over the past decade such figures were released on a three year programme and thus, he intended to continue with that tradition. Critics feel Darling is ‘working the system’ to favour his party in the coming elections, scheduled for May of 2010.

Thus far, the world’s most powerful agencies of credit rating have not tarnished the UK’s outstanding impressive credit rating, but after the elections, the situation could change. A downgrade could cause major havoc for the UK economy because it would mean the Treasury would be forced to borrow at much less favourable rates. While the current cost of debt is £30 billion for the time being, this near doubling would place the interest costs at almost twice the amount of the Ministry of Defence’s annual budget.

The cost of the debt itself is due to interest payments called coupons on bonds issued by the Government. These ‘gilts’ are sold through the The Treasury’s Debt Management Office in order to raise capital. Foreign nations and other large funds purchase the gilts and earn interest payments that are paid out twice a year.

UK to Have Bankers, Mega Rich Help Clear Debts

Spiralling debt levels in the UK have lead to big pain for the nation’s economy, but Chancellor Alistair Darling has a solution. He recently unveiled his plan to pull the economy out of recession: turn to Britain’s primary sources of big money, banks and the super wealthy.

Facing what financial experts consider to be the nation’s biggest debt ever, £178 billion, the effects of the financial crisis that swept the globe in the past year are blamed for much of Britain’s debt. Darling’s combination of raising taxes and cutting spending was designed to reduce this debt by half in the next four years. With a look towards the next General Election, Darling’s financial plan is to take an ax the debt by taxing banks in order to help those suffering economically at the lower levels of society. In an effort to institute more fair levels of taxation, Darling intends to shift the tax burden to rest more heavily on the shoulders of those households that earn a significant amount of income.

However, Darling’s one cent a day pay cap on public workers in 2011 has drawn fire from unions. His 0.5% increase for National Insurance so that those earning £20,000 or more face a tax hike, has also proved unpopular. With an upcoming stamp holiday extension being canceled, inheritance tax taking a freeze at £325,000 and VAT rising 2.5% at the first of 2010, the Chancellor has understandably raised some ire amount certain segments of Britain’s population. To offset these potentially upsetting measures, Darling alleviated a rise in corporation taxes, sparing more than 750,000 small businesses in an effort to boost the economy from the ground up and that the government would do more for those who could find work to stay off welfare. The State pension will be rising, along with child and disability benefits across the UK. These changes, paired with additional government help for people of all ages actively seeking work were designed to offer guaranteed jobs or training to those seeking to better their lives.

While Darling wants to see major cuts in spending, sectors such as police, education and health would not see substantial cuts. Recovery is the focus of these plans and to do that, the Chancellor envisions a shoring up of public services and infusing the economy with the funds needed to activate workers and businesses at the micro level with effects that should rise over time.

Darling has stated that he believes the economy will take a turn for the better in the upcoming year, but that it could still be somewhat rocky. Conservatives have accused the Chancellor of tossing out financially sound planning in favour of electioneering and a failure to convince the world that Britain is ready to do big business.

Bank Customers Stunned by Supreme Court Ruling on Unfair Overdraft Charges

After fighting what it believed to be unfair overdraft charges from banks, the UK’s Office of Fair Trading (OFT) has lost its two year court battle against seven major banks and one building society. The case had begun in lower courts, but after appeals by the financial giants, landed in the Supreme Court where the five most senior judges in Britain ruled that the OFT does not have the power nor authority to monitor banks for unfair charges. As a result, many customers expecting refunds of wrongly applied and excessive charges will get nothing back, the bad news coming at a time when many had been looking forward to having their money returned in time for the upcoming holiday season. A large percentage of those expecting the return of these fees will be turning to Individual Voluntary Arrangements and Debt Management Programmes as a way to get back on their feet financially.

The ruling stunned both legal and financial experts who had no doubt that the Supreme Court would rule in favour of the OFT rather than the banks. In fact, in a previous ruling, the banks had been told not to bother taking their appeal to the Supreme Court because there was almost no chance that they would succeed due to widespread disapproval from consumer advocacy groups working to help a huge number of UK consumers already struggling under massive loads of debt.

The OFT had sought to monitor these charges after customers began reporting fees ranging from £20 to £50 for each accidental overcharge to their accounts, even if those accidents were only a few pounds more than their account’s balance. In particular, consumer advocates felt that the fees were designed to target lower income customers who are already financially at risk and that this made the bank’s practice look eerily similar to predatory lending, a greatly disapproved of practice in Britain. Prior to taking the case all the way to the UK’s highest court, the OFT had won two cases in both the High Court and the Court of Appeal, exactly as experts had predicted.

The OFT had expressed concerns that the flagrantly high overdraft charges were unfair and could be considered unauthorised charges since they were subject to changes in price, without written or verbal customer consent, at the whims of the banks themselves. However, the banks considered the terms to be part of the contract customers signed when opening an account and alleged that the overdraft charges were needed to avoid having to charge fees for other services given to customers with more money in their accounts.

Financial and legal experts remain greatly puzzled as to why the judges of the highest court in the land ruled in the manner that they did after the previous rulings by the lower courts. The judges did issue a brief statement that the OFT has interpreted to mean that the grounds of their case was too narrow in scope to be effective at allowing them the power to monitor the banks fees to its customers. In other words, the Supreme Court feels the OFT, an official government body, does not have the right to monitor banks in an effort to protect financially vulnerable consumers from large lending institutions – at this time. The OFT had intended to investigate the fairness of the charges under the Unfair Terms in Consumer Contracts Regulations 1999, but have been told that this will not be considered possible under the law as it stands now. The OFT was also told not to pursue the case in the courts of Europe and to keep it within the UK.

The defendants in the case that the OFT brought were one building society and seven banks, including HSBC, Lloyds TSB, Nationwide, Clydesdale Bank, HBOS, Barclays, Abbey, and the Royal Bank of Scotland Group. All of these lenders had claims pending against them by a staggering number of customers, but all of those claims were frozen by the Financial Services Authority pending the Supreme Court’s verdict.

This means that customers waiting to get their fees refunded will now likely never see a penny returned to them. Had the ruling gone in favour of the OFT, the banks were facing nearly £20 billion in presumably unfair overdraft charges that they would have had to give back to customers. This would have been quite a blow struck to an already teetering financial sector, but also a major boon for consumers struggling with historically high levels of debt themselves.

The Treasury has promised to more aggressively pursue lending institutions that insist on excessive charges, going so far as to state that they intend to push forward legislation to cap overdraft charges if the banks and building societies will not limit the charges on their own. While this may help future customers of the lenders, it will unfortunately leave all those who have been overcharged up until now with zero compensation.

Many people are curious about what has happened during the past twelve months that could possibly have led to this Supreme Court decision. Over the past two years, despite the appeals by the banking institution, legal experts had been positive that the OFT would be clear to return the overdraft charges to customers, especially if the case made it to Britain’s highest court. However, during this time the government has bought up 43% of HOBOS and 84% of the Royal Bank of Scotland, two powerful UK banks. Adding to this the fact that the government recently announced that it secretly injected 62 billion pounds into both of these banks, could there be a conspiracy in play or is it simply coincidence that the government was facing a 20 billion pound loss if the OFT had gotten its way?

UK Banks Given Secret Loan of Over £62 Billion

In a revelation that has shocked the nation, the UK government has announced that the banking system teetered on the brink of utter collapse in late 2008, causing government decision makers to approve over £62 billion in clandestine loans to two of Britain’s most powerful banks. According to official documents disclosed only a short while ago and evidence turned in to the Treasury Committee in London, the move was made without informing taxpayers because it was feared that the already wobbling markets might grow even more unstable and that there could have been widespread public panic as a result.

The emergency financing was taxpayer-funded, and given to the Royal Bank of Scotland (RBS) as well as HBOS, each borrowing £36.6 billion and £25.4 billion, respectively. HBOS, which is now owned by Lloyds Banking Group, got its cash injection on October 1st of 2008 and then, less than a week later, the RBS received its boost. This came only weeks after Lehman Brothers Holding declared bankruptcy and the UK markets looked ready to nosedive. After even more loans further injections of capital this month, in excess of £30 billion for each bank, both Lloyds and RBS are now largely owned by the government. The government stake in the banks now stands at 43% of Lloyds and a shocking 84% of RBS.

The Bank of England, which made the loans, was granted indemnity by the Treasury in order to cover any potential losses caused by the emergency loans. The total amount of loans granted to these two banks alone is higher than the £49 billion spent on UK schools and larger than the national defence budget, as well. Although the banks have paid back the loans, the government continues to hold stake in both of them, causing questions to arise in light of the fact that both the HBOS and RBS were defendants in a recent court case, regarding unfair overdraft charges, which made its way to the Supreme Court.

For the past two years, the Office of Fair Trading (OFT) had been pursing HBOS, RBS and several other lending institutions because those banks were charging upwards of £20 to £50 to customers who accidentally exceeded their overdrafts. The OFT had won its case in both High Court and the Court of Appeal, with experts predicting a nearly guaranteed victory if the banks appealed to the Supreme Court. The hearing in the UK’s highest court took place in June of 2009, a mere 9 months after the government gained control of stock in both HBOS and RBS. When the shocking result, that the government’s own consumer protection agency OFT had been refused the power to investigate the overdraft charges that many customers been expecting to have refunded, many expressed speculation that the move might have been made to save the government from shelling out the £20 billion that would have been paid back to those charged unfairly.

Had that enormous sum been required, the government’s shares in the banks would have dropped and this leads many to question not only the billions in secret loans, but the swift change in court rulings, as well. An unprecedented number of UK citizens are already struggling under enormous debt loads and many had hoped to have the overdraft charges returned to them through the OFT, possibly in time for Christmas. While some had wanted to balance their budgets and take a holiday, many others needed the money to repay debts and get family finances back on track. Now these individuals will be turning to Debt Management Programmes or Individual Voluntary Arrangements since it appears that there is no chance they will be compensated for the unfair charges to their accounts.

Consumer advocate groups are expressing outrage and political speculators believe the situation could be a conspiracy simply based on the fact of who stands to benefit from not only the loans being kept secret, but the Supreme Court decision regarding the OFT’s powers. Could this be a conspiracy? Could this essentially boil down to government sanctioned predatory lending that comes at the expense of tax payers?