The Financial Meltdown: Special report on how the global economic recession is affecting us all ... from housing to food to the environment
Unemployment
By Westminster Editor James Cusick
Nowhere is safe. This appears to be the core message from the works and pensions secretary, James Purnell, who said this weekend that every part of Britain will be hit by rising levels of unemployment that will, by Christmas, take the numbers out of work to above two million. This is the estimate taken before the latest and most damaging chapter of the global turn-down caused by the credit crunch and a near fatal international banking collapse.
Economists in such times usually find a safe haven in their own internal language, resorting to impenetrable trends and sector analysis. Not this time. On the Bank of England's monetary policy committee and a respected labour market analyst, David Blanchflower described what lies ahead in words politicians usually run from. "These numbers are truly horrendous and much worse than I feared," said Blanchflower. He was referring to the statistics for the three months till August this year which has taken unemployment to its highest level since 1991. The current total is just under 1.8 million, a rise in the jobless rate moving from 5.2 to 5.7%. Blanchflower is certain what happens next; more than two million looking for a job by Christmas. And with a full-blown recession just round the corner, with little prospect that the government can now, at this stage, do no more than watch and sound sympathetic, Capital Economics have forecast that by the end of 2010 the jobless total will hit 9%, around three million. Among the more left-leaning members of the Parliamentary Labour Party, there is an unease that all hell is going to break loose soon, and that Gordon Brown's current "saviour" status is going to disappear as fast as it arrived. One Midlands MP said: "The Conservatives only have to dust down their old Saatchi & Saatchi posters from 1979 to make the point that whatever we've done in the last 10 years, is about to be undone." Brendan Barber, the general secretary of the Trades Union Congress, seems to be already preparing for what's coming. "I fear that the whole economy will soon feel the impact of the problems in the banking sector," he said. In a straight translation, that means that whatever the level of new jobs being within the UK economy, the job losses will be higher. Purnell's comments this weekend show that the government is already bracing itself in preparation for the political fallout that will come with soaring unemployment. The works and pensions department have in recent months been accelerating the gathering of regional jobless statistics to improve the picture they have of how unemployment will hit. In the last turn-down in the 1980s some areas of Britain escaped, especially London and south east England. This time round, unemployment in London is already estimated to be 300,000 and rising daily as the City's financial institutions re-evaluate their needs in a shrinking market. The latest unemployment figures appear to show increases across Britain and there is no evidence to suggest that the rise towards three million won't be uniformly felt. The National Statistics Office figures showed a rise of 164,000 in the three months to August. This means 1.79 million unemployed and 29.42 million in employment. Of the new rise, compared to the previous quarterly numbers, 19,000 job losses have taken place in Scotland, 10,000 in Wales, Yorkshire and Humberside lost 17,000, the North West 14,000, the East Midlands 13,000 and the South East 28,000. What will also be worrying Purnell as he briefs Downing Street on what lies ahead for the jobs market, are other underlying dangers. Long-term unemployment, where people are out of a job for more than 12 months, is up from 21.6% to 24.5%. Blanchflower has also told the government that he is concerned at the substantial rise in the numbers of young people who are unemployed, many of them school leavers. Youth unemployment was first measured in 1992. The current 56,000 rise is the biggest increase since then. The jobless total is also reflected in those claiming jobless benefits, a jump of nearly 32,000 taking the total of claimants to 939,000, also the biggest rise since 1992. The sectors losing jobs at an accelerating rate include the service sector covering hotels and restaurants, the finance and business sectors struggling to deal with the credit crisis and how the bail-out packages announced by governments in the US, Britain, Europe and across the world can help them long-term.
Food
By Environment Editor Rob Edwards
As the credit crunch starts to bite and prices rise, shoppers are changing their habits and starting to search out cheaper food - and avoid the pricier premium brands. Monitoring by the market research company, TNS, has revealed a distinct shift in behaviour over the last year. The most dramatic change is a 34% rise in the sales of supermarkets' own cut-price brands, coupled with a 2% decline in their premium brands and a 9% drop in their more expensive "healthy" products. TNS research also suggests a growing preference for cut-price food stores, while those that specialise in more expensive food are stagnating. Aldi has experienced a 22% growth in sales over the last year, while Waitrose's market share has declined from 3.9% to 3.8%. "The search for value intensifies", was how TNS described the "down-trading" trend. The company regularly monitors the buying of 75,000 supermarket food products by 25,000 representative households across the UK. The monitoring also uncovered what TNS called a "severe slowdown" in the growth of the organic food market since Easter. "This is precisely when we have seen the effects of the credit crunch start to creep through into the grocery trade," said TNS's Chris Longbottom. Total UK spending on supermarket organic food and drink has fallen from nearly £100m a month early this year to £81m a month in the summer. The biggest fall has been in organic eggs, but there have also been drops in organic fruit and vegetables. According to Longbottom, organic food's share of the market has declined for the first time in five years. Rising prices triggered by high grain costs have caused people to make complicated compromises. "Consumers seem prepared to pay 20p for a nice, kind free range egg compared to 10p for a battery one," Longbottom said, "but not 30p for an organic one." Sales of fairtrade food, which make up a very small percentage of the market, have held up. The Soil Association, which certifies organic food, accepted that supermarket sales seemed to have "plateaued". But it pointed out that TNS's monitoring didn't cover direct organic box' sales from producers. The association's Scottish director, Hugh Raven, pointed to evidence from one of the UK's largest organic suppliers, Riverford, of a 6% increase in sales over the last year. "It's a mixed picture," he said. "While the direct sales market is growing, supermarket sales seem to have flattened."
Shopping
By Rachelle Money
The Scottish Chambers of Commerce released the latest results of the third quarter of 2008 survey which showed declining sales in the retail sector because of a lack of consumer confidence. Retailers anticipate having to raise their prices in order to cope with rising costs of utilities and raw materials. The survey concluded that almost half the retail sector surveyed said they expected a further drop in profitability by the end of the year. The high street looks like it will take another hit during the festive period as reports suggest 78% of Christmas shoppers will be going online for their presents. That number is up from 56% on last year. It is thought that shoppers will take advantage of competitive pricing and convenience of not having to drive to shopping centres or out-of-town malls. Some popular fashion retailers have increased the interest rates on their store cards. Karen Millen, Oasis and Principles have pushed up the interest rate by 4.3%, from 24.6% to 28.9%. Mark Lyonette, chief executive of the Association of British Credit Unions Limited (ABCUL), says: "The news that store card interest rates are on the way up means that shoppers should think twice before putting purchases on their store card." Michelle Slade, an analyst at Moneyfacts, says: "It wouldn't surprise me if other companies hike their rates over the next few weeks. Where one leads, the others usually follow." Sales were up just 0.7% in August compared to a year ago, according to the latest figures from the Scottish Retail Consortium. They were the worst August sales figures since 2005. It could also be a quiet Christmas on the high street. Richard Dodd, spokesman for the Scottish Retail Consortium, says: "It's clearly going to be a tough year."
Travel
By Helen McArdle
Foreign travel and transport may be one of the few bright spots amid the economic turmoil - this week saw several major airlines, including British long-haul leaders Virgin Atlantic and British Airways, cut surcharges for economy class passengers in response to falling crude oil prices. As the world economy slides towards recession, demand for fuel has ebbed. The cost per barrel fell to a year-low of $69 per barrel on Thursday - down 53% since hitting a record $147 in July. Unfortunately, the surcharge cuts will only equate to a saving of between £5-£13 per passenger. According to travel association ABTA, however, the credit crunch has done little to dent Brits' enthusiasm for travel - in a survey conducted in September they discovered 83% of holidaymakers who had been on a recent overseas break were planning another within the next 12 months. Motorists also had cause to cheer last week after Gordon Brown called on petrol companies to reduce their forecourt prices. Supermarket chains Asda and Morrisons have already slashed their prices to less than £1 per litre. Rail passengers, meanwhile, face a mixed outlook. While Virgin announced plans on Friday to introduce a number of cheap fares from December - among the bargains being a £12 ticket from Glasgow to London Euston - which must be purchased in advance. Scotrail is set to review its ticket prices in January. Although a spokesman said it would "not be speculating at this stage", a large proportion of Scotrail's fares - including off-peak returns, season tickets, and all travel in the Strathclyde region - are set by Transport Scotland, pegged at inflation plus 1%. On the basis of current retail price inflation at 5%, passengers face a 6% hike in tickets in the New Year.
Hotels
The hospitality industry, including hotels, is facing challenges due to the ongoing economic recession. With the decline in consumer spending, people are cutting back on travel and leisure expenses, including hotel stays. Many hotels are experiencing lower occupancy rates and decreased revenue as a result.
In response to the current situation, hotels are exploring cost-cutting measures and implementing strategies to attract customers. Some hotels are reducing room rates and offering special promotions and discounts to entice travelers. They are also focusing on providing excellent customer service and amenities to differentiate themselves from competitors.
Additionally, hotels may need to reassess their marketing strategies and target new market segments. They can focus on attracting local customers for staycations or offer packages for business travelers. It is crucial for hotels to adapt to the changing market conditions and find creative solutions to maintain profitability.
While the road ahead may be challenging, the hotel industry has proven resilience in the face of economic downturns in the past. With strategic planning and adaptation, hotels can navigate through these tough times and emerge stronger when the economy recovers.