This commentary started with my having a fatherly chat with my son the other weekend and has really brought home to me again the volatility of the economy and how young people at the start of their careers have to take on board some other hard facts. It is not just getting the job, enough has been said about that already elsewhere. For those, and in this case, a twenty three year old with a daughter and student partner, he has no experience of any other economic environment that he can relate to or learn from.
In this example we have a young person with a good skill that has earned a good job, promotion and the prospect of a good bonus; a young person who has a foot on the ladder in home ownership through a shared ownership scheme. But the advice to him has to be “take care”. That may not have the entrepreneurial spirit of risk taking, but it has the backing of thirty years business (and sixty plus life) experience.
Money may be cheap, mortgages low but we have been there and been caught out before. A Halifax report tells us that mortgages are at their lowest level for 14 years. The mortgages that were taken out in the first quarter accounted for just twenty seven percent of the borrower’s income. Back in 2007 the ratio was forty eight percent and over the last thirty tears the ration was thirty six percent.
As these rates are at a record low we are pretty safe in thinking they will not fall, so there is only one way to go. The Bank of England reports that I read and the news they put out suggest that they are unlikely to go up until 2016, for the very short term in the life of a loan, that is reassuring. The grave concern is how much will they be raised and realistically how soon?
For those new to the cut and thrust of the economy and the responsibility for managing it, what do we need to do to prepare them? Will they listen anyway? We need to remember that whereas over the previous thirty years our mortgages drew a higher proportion of new borrower’s salary than they currently do, we benefited from a constant wage growth that buffered us. That has changed with our “real” incomes falling. We are faced with the relentless increase of the cost of public utilities and travel, the cost of fuel for our cars we rely on to take children to school, to go to workplaces off the public infrastructure routes, the cost of child care – the list is endless. The one area that seems to have been brought under some form of realistic control is that of our local authority spending.
For those new to the work chain, there are huge considerations to be made. So much of this comes back to employment and employability which is an area I have been focussing on. However more that that is the inexorable demand for more business opportunities and at margins that deliver the profitability to enable more of us to employ people. The only way out of this is to generate that business. Many continue to suggest that the solution lies in invigorating the construction industry, fair enough, there is a certain scope for the supply chain supporting it to thrive but it is not enough. Currently I am working on the support of the home based business sector which is one that may not have the employment solutions we need but is part of the bedrock upon which to build growth. We have heard about the zero hours contracts in the last few weeks, a system that demands the highest ethics from employers in not taking advantage. We are constantly talking up apprenticeships which I fully support, and here is one area that is crying out for some form of sharing between the micro businesses.