Friday, July 01, 2011

The UK's Middle Class Malaise

While the country has been slow to emerge from the latest recession, feelings of job security are at an all time low. As a parallel, unemployment is on a continual rise.
The middle classes, who had for so long played their part in taking out savings products, are turning to debt based financial solutions to get them through this period.
While the fear of job loss may, in theory, lead to families building up their reservoirs of savings, the reality is that the opportunities to do so just aren't there. With money at a premium, there are no spare finances to save.
Instead, with the middle classes struggling to pay for basic items, loans and credit cards are becoming more popular and applications for these types of products are showing a steady rise.
While many analysts had hoped that the debt based economy of a few years ago may now be a thing of the past, circumstances have dictated that there is still a dire need for these products and that is precisely why their popularity is increasing.
After the financial issues of 2008 and the concerns over sub-prime lending, many institutions began to tighten their criteria with regards to new applications. For a time, therefore, it was difficult to secure a loan if you had a less than perfect credit history.
However, where there is a demand, a solution will be found and the rise of financial products such as pay day and log book loans has increased the sub prime market once again.
Meanwhile, similar financial products are on the increase and credit cards specifically for poor credit risks are another example of debt based solutions stepping in to fulfil a need.
Traditionally, it seemed that middle class families were not likely to fall into the trap of low income life that relied on debt to see them through. However in today's climate, they are the ideal candidates for this type of product.
An economy that turns away from savings and moves into debt in this way cannot be sustainable and these developments are bad news indeed for a country that is looking to move away from recession.
The key to the whole business is unemployment and job security and while that is at a low point, the middle classes are the focal point as far as how this economy will carry on over the next few years.
As unemployment rises, money for individual families will become scarcer and savings will drop while the rise in debt based solutions can only continue.
In the past, the economy has relied on middle class workers to keep it buoyant and the change from savings to debt in this demographic has been crucial in the financial performance of the country as a whole.
Moving forward, it is vital for the economy as a whole to address this individual issue and turn the balance back from debt and towards families who can spare money for savings at the end of the month.
To do this, job security has to be paramount on the agenda for the government and this issue of middle class malaise has to be reversed if the country is going to pull away from recession.
The next few months and years will be pivotal and financial analysts will be desperately hoping that a solution can be found so that the middle class family can find itself full of financial confidence once again.

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