A real economic conundrum for the UK – comment

Following the ONS GDP figures this morning, Richard Pike, Phoebus Software chief sales and marketing officer, says “Although on the face of it, today’s announcement of a 0.2% reduction in GDP from June to September isn’t good news, it is a better performance than some economists predicted. The reality though is that everything now seems to back Andrew Bailey’s opinion that a long-term recession is likely, and this will create a real economic conundrum for the UK. A recession generally means that many companies will create less revenue and therefore profit. The usual assumption is that this would mean salaries will retract, less taxes get paid and therefore there is less money available for public services.  At a time when the public sector is screaming out for higher budgets this is not a good position to be in especially as in many cases salaries will need to increase, otherwise we will face large scale, long-term industrial action across many sectors.

“For the mortgage market, we have been through recessions previously and have survived through a mix of tenacity and innovation.  In this instance, predicting arrears performance, especially in a rising interest rate and inflationary environment against a backdrop of uncertainty, means lenders have some interesting decisions to make on how to prepare for so many unknowns. We know affordability and disposable incomes are shrinking, and naturally this means focus needs to be given to risk and arrears strategies. However, “staffing up” in many instances may not be the right way to deal with arrears cases. All that is happening is that staff are being recruited to work with manually inefficient processes, instead of looking at longer term strategies and automating processes through core servicing platforms and only dealing with cases that need focus and attention. With a longer-term pessimistic hat on, the time is right to look at servicing platform options and ensure that ROI is achieved by investing in technology that can be flexed more easily than recruiting and re-allocating staff. Hopefully, the Chancellors Autumn statement next week will provide some substance and clarity against which we can all plan.”