In January of this year, the UK officially entered into a recession for the first time since 1991. This might have already had a significant impact on your life, especially if you’re an individual carrying any amount of debt. To find out what implications the recession has and/or can have on the average person, read on for some insight.

What is a recession?

The most commonly accepted definition of a recession is when the economy shrinks for two consecutive quarters. When this happens it is known as a period of negative growth - this means that the Gross Domestic Product (GDP) (the total amount of goods and services produced by the UK) would have to reduce for a total period of six months. The most recent official recessions in the UK happened in 1974, 1975, 1980, 1981 and 1991.

What does this mean to the average person?

For many people, the current recession is already being felt. As the frailties of the economy are widely reported daily in the media, consumer confidence is tremendously low - meaning that people aren't spending. People start tightening their economic belts, choosing to put off purchases of bigger items, such as cars and audio equipment. Consumers are also struggling to secure credit, so there's less money available to be spent as well. House prices have fallen rapidly, but because of the shortage of money around, and the lack of availability from banks, many people are opting to rent instead. Credit card companies are lowering credit limits to reduce their risks and debt advice organisations are seeing record numbers of enquiries for their debt solutions like debt management plans, IVAs and Trust Deeds. The need for debt help is one thing that seems to be on the rise in 2009.

IF YOU ARE IN DEBT AND NEED HELP CALL THE DEBT PEOPLE ON 0161 905 0802

As companies start feeling the pinch through reduced incomes, widespread redundancies are inevitable. Many have already been made. We could be seeing unprecedented numbers of people on the dole - with up to 10% of the workforce claiming benefits. This not only affects the economy, and puts further strain on the benefits system, it also affects the confidence and morale of the country too - especially those out of work. 

What to do if you are in debt

As debt levels rise and the number of people seeking debt help increases, what can be done to avoid bankruptcy or bailiffs from visiting and taking property? To start with, consumers need to understand why they are in the situation they find themselves in. Is it because they have lost their job and have seen their income reduced, or is it because they have financially overstretched themselves – by gathering too many loan, store card or credit card debts? Regardless, if you have more going out of your bank account than you have coming in, then it's worth speaking to a reputable and impartial debt advice organisation.

They will aim to identify the cause of any problems and may recommend some simple budgeting advice, such as cutting out unnecessary luxuries like satellite subscriptions. The issue may be caused by financial mismanagement, through not prioritising debts properly. Debt advice organisations should be able to recommend ways to overcome this and avoid making the same mistakes in the future.

For some people, a debt solution may be recommended. These vary from informal solutions like debt consolidation loans and debt management plans, to more formal arrangements like an Individual Voluntary Arrangement (IVA). Reputable companies will offer free IVA advice and information on other debt solutions, and will be able to help customers take steps to become free from debt. Most will also offer IVA help and guidance on the legal implications involved.

In some instances, bankruptcy may be the only option available – once all others have been explored. This should really only be seen as a last resort, but nevertheless should be considered in certain situations.

IF YOU ARE IN DEBT AND NEED HELP CALL THE DEBT PEOPLE ON [0161 905 0802