In response to a new report claiming that 70% of UK companies may be planning to freeze or cut wages this year in an attempt to get through the recession, debt management company Gregory Pennington has advised workers to take what steps they can to prepare for any potential reduction in income.

The company added that anyone with debts to their name could be at a disadvantage if their income is reduced, and as such they should look to address their debts as a matter of priority.

The latest monthly business survey by the British Chambers of Commerce (BCC) claimed that of 400 companies questioned, around 70% planned to freeze or cut wages later this year.

58% of companies said they planned to freeze wages this year, while 12% planned to actively reduce wages.

Most of the rest of the companies, however, planned wage increases of between 1% and
3%, with almost one in ten companies saying they would raise wages by more than 3% –
suggesting some areas of business are not struggling, despite the recession.

Even so, half of the companies were considering making staff redundant in the next six months in an attempt to survive the economic downturn, according to the survey.

A spokesperson for Gregory Pennington said that despite some surprising optimism amongst the 9% of companies which would be raising salaries, most people would be best advised to ensure that their finances are as healthy as possible in preparation for the next few months.

“We are in a difficult situation, in which many costs of living are rising rapidly while the equity in our homes is falling. Along with the prospect of high levels of unemployment, it’s unclear whether the situation will get better or worse in the coming months.

“In any situation involving that kind of uncertainty, it’s especially important that people are quick to ensure that their finances are in the best possible shape for getting through potentially difficult times.

“Perhaps the most important factor is savings. People with savings have a ‘safety net’ they can fall back on if they find their finances are hit particularly hard, and this could help families and individuals alike to compensate for any reduction in income.

“However, getting on top of any debts is also very important – and if the borrower has savings they can fall back on, it’s often most important that those savings are used to repay their debts. The logic behind this is simple – the interest on debt usually grows more quickly than the interest on savings, so the borrower will spend less overall by paying off their debts as quickly as possible.

“However, workers need to consider this carefully. If they are facing potential redundancy, they may wish to hold on to their savings so that they can continue to repay their priority debts, such as their mortgage.”

The Gregory Pennington spokesperson added that there are many people who may be experiencing problems with debt who do not have any savings to fall back on – and those people should seek debt advice as soon as possible.

“A lot of people may be facing a reduced income or even redundancy with little or no savings. If those people also have debts to repay, the situation can be quite worrying.

“However, a professional debt adviser can help people to find the best way of tackling their debts – which can offer a lot of relief in difficult times.”

Via EPR Network
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