Be prepared for job cut consequences

PAUL HUNT, MANAGING DIRECTOR, PHOEBUS SOFTWARE
PAUL HUNT, MANAGING DIRECTOR, PHOEBUS SOFTWARE

The cuts are coming. With the election over we can expect the public sector to take a beating. You only have to look at Greece for a taste of what we can look forward to.

There, 25% of the workforce is employed in the public sector and the cuts the government will have to make to control borrowing could run into the tens of thousands.

We can expect something similar here, although our working population is larger than that of Greece so the numbers may look even worse.

The new government will have a tricky balancing act but action must be taken. It has to cut public sector spending, which means big job and pay cuts.

Given the size of the public sector, which accounts for 20% of our workforce, we will see a knock-on effect in the housing market.

Unless measures such as raising the Stamp Duty threshold and forcing banks to offer favourable lending criteria work first-time buyer numbers could fall.

And fewer people will be able to move home as they struggle to make mortgage payments on a single salary. Remortgaging will suffer a similar decline.

If job cuts gather momentum, buy-to-let tenant arrears will go up as tenants lose their jobs. As a result, mortgage servicers will find themselves busy with non-performing portfolios.

Some readers may think I am scaremongering by comparing the UK with Greece but the longer we leave it, the worse it’s going to be for us. Tough decisions need to be taken now.