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Rising Interest Rates and the Affordability of Debt

Rising Interest Rates and the Affordability of Debt

pegs-349782_1920.jpgHousehold debt is at its highest level since the 2008 financial crisis. The amount of debt owed on car financing, personal loans and credit cards is estimated to be more than £200bn. Add to this the drop in currency value since the EU referendum and the recent interest rate hike from 0,25% to 0,5%, and British households are facing an increase in their cost of living. Though this initial rise in interest rates may not seem all that significant, the expectation is that rates will be raised at least twice more before 2020. 

Can British households afford their debt?

A recent survey by insolvency trade body R3 and ComRes found that over 30% of British adults would struggle to afford a 1% rise in interest rates. 

This comes at a time when many households are already living on very fine economic margins and credit is not limited to luxury purchases, but rather a requirement that makes it possible for people to pay for necessities like a home, a car to get to work in or even basics like food. The dangers of the debt created in this manner is masked by the cheap credit that has been available. According to Mark Sands, R3’s personal insolvency committee chair, cheap credit “masks the financial problems that people are having and stores them up for later.” 

How will a 1% rise affect debt repayments? 

The survey of over 2,000 British adults found that 43% of adults with bank loans would find it difficult to repay their debt if interest rates rose by a single percentage point, as would 39% of adults with an overdraft and 38% of those with a mortgage. An even more concerning find is that as many as 4% of those with an overdraft, a car loan or a bank loan say that a one percent rise in interest rates would make it impossible for them to repay their debt at all. 

When it comes to credit cards, 35% of those with credit card debt would find the increased repayments difficult and 3% would not be able to afford repayments. Of those with payday loans, 46% would have difficulty repaying their debt and 11% would be unable to afford repayments. 

Eileen Blackburn, chair of the technical committee of R3 in Scotland, comments ‘This increase, when combined with the predicted further short term increases should be a call to action for borrowers to assess their exposure and future ability to repay’.

How can I lessen the impact of the interest rate increases?

How did British households become so indebted? The low interest rates are partly to blame as it becomes easy to take credit for granted. It has been more than a decade since the last interest rate increase in the UK and anyone who has taken credit in the last ten years will never have experienced a rise in their cost of borrowing; they may not even understand the impact that an increase could have on their debt. If you are worried about making repayments on your debt and want to know how the increase may affect your budget, you should seek professional advice.

What Impact Will Putting Britain First Have On The UK Hospitality Industry?

What Impact Will Putting Britain First Have On The UK Hospitality Industry?

As Brexit negotiations continue to dominate the headlines, the hospitality and leisure sector wait with baited breath as to how these talks will impact their labour supply. The overall impact of Brexit on UK immigration remains unclear, but regardless of what is agreed hospitality leaders are only too aware that a shortage of staff is inevitable.

What has the government indicated to date?

The government have heavily indicated that any EU Nationals who have lived in Britain for 5 years will have a “settled status”, and that this will be a new form of indefinite leave to remain, so any employees within this category, for the time being, will not be affected. However those with less than five years will have to apply for continued residency and this may be a cause of concern for hospitality leaders.

So far the government have also failed to outline any regulations around those who are yet to enter the UK as the free movement debate is still a major sticking point for the EU States and formed a major part of the Leave Campaign. This has unfortunately resulted in a great deal of uncertainty for the industry as we rely so much on EU nationals to fill our positions both seasonally and annually.

‘Top Secret’ Home Office plans

In September, a highly sensitive Home Office document was leaked to the Guardian. Whilst the plans set out were only a draft, yet to be reviewed or approved by Ministers, it did serve as a telling insight into the immigration strategy for after we have left Europe. The document set out that in the days following Brexit, free movement as we know it will come to an end, for all but the highest skilled workers with the intention of Britain reducing net migration to “sustainable levels” and “taking back control” of its borders.

The 82-page document made for grim reading - in brief, the restrictions include:

• Potential numeral caps on those working in lower skilled jobs;
• A maximum of two years residence for low skilled workers;
• A requirement on EU nationals to register 3 to 6 months after arrival for a biometric residence permit; and
• Plans to introduce right to work checks for EU nationals to be carried out by the employer with criminal sanctions and fines if illegal workers are discovered.

Knock On Effect on Hospitality Industry

Following the Brexit vote, both hoteliers and restaurateurs have noticed a drop in migration, though this also may be correlated to the drop in the value of a pound following the vote. In a post-Brexit world if the above barriers are implemented for EU nationals, even if they are tamed down, the UK will quickly lose it's appeal to these individuals.

The hospitality and leisure sector rely on recruiting hundreds of thousands of workers each year to stem natural turnover. In the lead up to March 2019, we are likely to see increasing EU nationals leave the UK and a distinct lack of people migrating into the country – this will result in a rapid and severe labour shortage.

What Measures Can Be Taken?

It is clear that the putting “Britain first” mentality will have a dramatic impact on both recruitment and retention in the hospitality and leisure industry, which is something we can ill afford when tourism is booming.

Hoteliers and restaurateurs should take steps now to stem the flow by:

• Encouraging EEA national workers and their family members who have been in the UK for five years or more to apply now for permanent residence – this should make applying for ‘settled status’ more streamlined; 
• Encouraging EEA nationals who have been in the UK less than 5 years to seek advice;
• Ensure offers and contractual employment terms are conditional on an individual having the right to work in the UK;
• Consider how you can support EU nationals entering the UK. In 2019, it could be that you will need a sponsor’s license from the Home Office to sponsor EU nationals under a tier 2 points based system – apply now to avoid a rush once plans become clearer: and 
• Plan ahead as to how you will monitor and manage right to work checks – HR software will be crucial to keep track of expiry dates and document compliance.

We are currently facing a great deal of uncertainty moving forward and this can be an alarming time for the hospitality industry but there are steps we can take to ensure we are as prepared as possible for March 2019, and ensure that regardless of the legislation that is implemented, we will be ready for it.

GDPR preparation for charities

GDPR preparation for charities

Please note this blog was originally posted on LinkedIn on 26 September 2017.

There has been an overwhelming amount of research and surveys undertaken that are all reaching the same conclusion - the vast majority of organisations have not started to put the necessary steps and procedures in place in preparation for the launch of the General Data Protection Regulation (GDPR). With under a year to go, organisations should be thinking now about implementing the appropriate compliance updates to their current data protection and acquisition strategies to ensure they are 100% ready in time for when the 25th May 2018 rolls around.

According to the Information Commissioners Office (ICO), failure to comply will result in fines up to £17million or 4% of the annual turnover - whichever the organisation would consider most severe. In direct comparison, under the current Data Protection Act which GDPR is replacing, the absolute maximum fine is £500,000. This alone is clear indication that GDPR will involve a stricter approach in regards to data protection. 

It is also important to note that charities are not exempt from historical or future data legislation, with equally heavy fines in place for those who seriously breach this new piece of legislation.

In the last year alone, we saw 13 charities identified by ICO with £181,000 worth of fines being amassed for breaching the current Data Protection Act. Household names such as Cancer Research UK, Macmillan Cancer Support and Oxfam were amongst those charged:

  • Both Cancer Research UK and Macmillan Cancer Support were found guilty of profiling their donors based on wealth without their consent. For instance, between 2010-2016, Cancer Research UK managed to capture the wealth data of 3,523,566 individual donors. And in 2014 Macmillan Cancer Support wealth screened 2,188,508 individuals. The most obvious reason for practicing this would be to source the most valuable donors to target for their respective causes. According to the ICO, another motivator for this practice would to seek out those who would be likely to leave donations in their will. 
  • Beyond that, all 3 of the charities also sourced additional data on their donors that they did not provide themselves to strengthen their donor databases. This is categorised as a breach as the donor did not have the opportunity to select what exact data they wanted to give away. This data could be used as another direct contact avenue to ask for more donations.

The key takeaway here is that charities remain accountable under the new legislation. In light of these offences and the sheer number of investigations conducted, it can be assumed that ICO will be keeping a watchful eye over charities and scrutinising their future data protection competencies.

Back in February of this year, the Fundraising Regulator and the Charity Commission released a consent guidance document which stated that:

Charities must have a clear understanding of the basis on which they will justify their collection and use of personal information for their direct marketing purposes…communications should include a mechanism to withdraw consent easily at any time."

ICO does advocate that an ‘opt-in’ feature is the best and safest way forward for both charities and businesses alike. Many charities and private sector organisations are relying on ‘legitimate interests’ clauses, however this does not prove that the data itself was gathered in a lawful way. If consent is not actively received then charitable organisations cannot assume it has been given, noting that a previous donation is not considered consent. Ultimately, changing the ways in which charities collect and use a donor’s personal information, including in any direct marketing approaches.

To avoid a repeat of the ICO charity investigations and subsequent fines, we recommend that all businesses start auditing their current data protection and acquisition procedures and consider seeking out expert assistance to guarantee GDPR compliance.

Here at FD Cyber Control, we can help simplify and strengthen your knowledge surrounding the changes in legislation.

To learn more about how FD Cyber Control could help or to arrange a free consultation, visit here.