Those living furthest from London will be hit hardest of all

• The UK economy is simply not growing enough to absorb the number of people looking for work
• Struggling companies are laying people off or going out of business
• Public Sector cutbacks are sending thousands more to join those already desperate to find a job

This combination is driving up the jobless total numbers, but how high they will go is still unknown. The impact upon regional economies is also worryingly uncertain. This is because it is generally accepted that the biggest economic hit will be taken by people living in areas where there is a disproportionate reliance on the public sector for jobs.

Where traditional industries failed or manufacturing has moved abroad, local authorities and government agencies became the engine of their local economy. They were given budgets for urban regeneration, for example using regional development funds to tackle unemployment black spots.

However many of the new jobs created by this investment were in modern serviced based industries. They were inevitably dependent upon the health of the UK economy and in particular local  spending power. By definition service industries rarely generate international sales. Manufacturing and precision tool building competing on the world market cannot really be replaced by double glazing manufactures and internet marketing companies

In the major northern conurbations the spending power of people employed in the public sector is critical to the vitality of the local economy. In contrast, notably in London and the sprawling commuter towns of the southeast, the workforce is predominantly in the private sector. Jobs here took a big hit in 2008/9. Retail in particular saw closures and redundancies. At the time there were also massive cut backs in the building industry and financial services. Nevertheless most private firms survived and are now operating profitably, albeit at a lower turnover where the market for their products and services has shrunk.

Most  companies are marking time and waiting to see how the UK economy survives before they look to grow or even think about recruiting. As a consequence, many are driving lean businesses quite hard. The more robust can quietly increase their margins as debt laden competitors go under. Economic commentators are now pointing out that many big firms are sitting on significant piles of cash, with smaller firms happier to pay down debt than invest in expanding their businesses.

Consequently, for areas of the country where there is a concentration of these successful firms, the reduction in public sector head count and local government spending, only has a marginal effect on what is spent locally in shops and on services.

For social historians, perhaps one of the measures applied to the Coalition and the wider effect of the recession, will see the unwinding of the social engineering of the cash rich Blair /Brown years. During this time depressed regions in the North saw a significant injection of public money. They also benefited from a deliberate policy to move central government administration out to the provinces. Hence even cut backs made by central government, for example the recent announcement that regional offices dealing with road tax wee closing, will also be most keenly felt outside of the southeast.

Consequently we are most likely to experience a period where job losses are magnified in the north and relatively stable in the south. Competition for the available jobs will be very tough everywhere, however the sheer number chasing every job outside of the southeast will be far greater. In these areas, following redundancy, the average length of time out of work will almost inevitably grow. The most likely people to be affected will be those unwilling or, more likely unable, to afford to move for work. Inevitably this means families. Financially most households are in an impossible position to move anywhere within commuting distance of London.

The fallout from this is a re-emergence of a sharp north south divide. It should be a wake up call to anyone who works in the private sector outside of the southeast. No longer should they feel safe compared to their neighbours in the public sector who are currently experiencing redundancies and wage cuts at this time. The spending shortfall this will create will spill over into retail and service industries. For any wage earner in a family working in these sectors, now is the time to consider what would happen if their employer had to make cut backs to reflect reduced local demand.

For those with savings that could pay their bills whilst out of work for six to twelve months, things might get tough, but they could survive. The shocking truth is, on average, most people are out of work for seven or more months following redundancy. During this time they are largely on their own financially. State benefits such as job seekers allowance are less than £70 per week and can do little to help.

There is however a low cost alternative for anyone in steady work at this time who wants to protect their family and themselves against the financial penalty of redundancy; Income Protection Insurance can pay anyone who is unable to work, due to accident sickness or unemployment, up to £1,500 per month. Tax free and without affecting their entitlement to state benefits.

Typical premiums for someone age 30 buying i:protect’s popular  ‘Lifestyle Protection Insurance’, paying out £1,000  per month, is under £30 per month. Quotes this low are the preserve of on-line specialists like i:protect. The same cover can be bought from banks and IFA’s, for considerably more, where they charge for personal attention. This is however a very simple insurance product that is easy to buy on line. There is no need to risk a spiral of debt or even the potential loss of a family home when savings can no longer pay the monthly bills.

A critical point to understand is how policy underwriters insure people. They look for applications that  have an average risk of redundancy. If an employer has made announcements of cut backs, or is even involved in merger, look out. The underwriters of short-term Income Protection Insurance view employees in this position as little different from a being asked to insure a building already on fire! Therefore anyone in a job at the moment and thinks this insurance might be for them, now is the time to buy, preferably sooner rather than later.

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Tags: Income Protection Insurance, Lifestyle Protection Insurance, Redundancy protection, unemployment insurance

This entry was posted on Wednesday, February 8th, 2012 at 4:23 pm and is filed under Income Protection Insurance, Mortgage Payment Protection Insurance, Unemployment Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.