HR experts: Cost-of-living crisis may last for years
Research* undertaken by national intermediary Partners& in September suggests that the vast majority of senior HR leaders expect the inflation crisis to last for a year or longer, and 1 in 10 employers are uninsured against criminal activity
Hardly any senior HR and employment professionals (1%) expect the UK’s inflation rate to return to its pre-crisis target level within the next twelve months.
This worrying statistic was established in a survey of more than 160 senior Human Resources (HR), Finance, Payroll, and C-suite professionals by fast-growing national intermediary Partners& in September. The survey revealed that 9 in 10 employers expected the inflation crisis to last for more than a year, with 40% believing that inflation would return to its target rate in 1 – 2 years, and exactly half of all employers (50%) expecting the reset to take 2 years or even longer.
Steve Herbert, Wellbeing and Benefits Director at Partners& said: “There appears to be a persistent myth in the national media that the peak of inflation will mark the end of the cost-of-living crisis. Yet passing the peak of inflation means only that prices are continuing to increase from their already high level, just at a slightly lower rate than before that peak was reached. This effect is known as disinflation.
“It follows that employees pay will continue to be squeezed until inflation returns to somewhere near it’s expected 2% Bank of England target level, adding to the long-running stagnation of real earnings which the UK has experienced ever since the financial crisis of 2008. Employers will therefore need to be mindful that financial stress and money worries will continue to plague many employees throughout this period.”
Partners& also point to the recent turbulence in financial and currency markets – and in particular the rapid growth of mortgage interest rates – as another concern for millions of employees. Mortgage market experts are currently predicting the Bank of England (BoE) base rate to increase from its current level of 2.25% to as high as 5% or even 6% next year.
Herbert continued: “By historical standards these base rates would not be considered particularly significant, yet they are more than double the current rate, and much higher than the record low of 0.1% experienced during the pandemic. It should also be noted that the level of mortgage debt is now very much higher than it was the last time that interest rates hit the 5% level, and it follows that the impact on monthly repayments is likely to be quite penal for those with mortgages. This is worrying, not least because around 1.8 million households will reach the end of their fixed term mortgage deal in 2023.
“We are deeply concerned that the cost-of-living crisis combined with the increased cost of borrowing will leave employees facing years rather than months of difficult financial decisions.”
Partners& highlight that financially distracted or distressed employees are likely to be less engaged, focused, or productive at a time when employers need each and every employee to deliver their optimum level of productivity. The intermediary is encouraging employers to offer workers practical support via the targeted use of employee benefits, discount schemes, and financial wellbeing tools.
Partners& also warn employers that the extremely difficult financial situation ahead could force some workers to cross a line into areas of professional bad practice or even potential criminality. Employers need to be aware of these risks, and ensure that they have the right insurances in place to protect their organisation.
Matthew Clark, Cyber Director at Partners& added: “Our research reveals that more than 1 in 10 employers (13%) don’t have crime or cyber-crime insurances in place currently, leaving their entire organisation dangerously exposed in the event of criminal activity. It is also the case that fewer than half of all employers (46%) surveyed actively reviewed their cover provided on an annual basis to ensure that it is still appropriate.
“We would strongly encourage all employers to urgently review their cover in case there is an increase in illegal activity in the difficult months ahead.”
Please visit the Partners& website for details of their new Financial Wellbeing support offering and Cyber insurance services.
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*The Research was undertaken at the Partners& Employment Webinar on the 8th September 2022 amongst an audience of more than 160 senior Human Resources (HR), Finance, Payroll, and C-suite attendees.
About Partners&
Partners& is a Chartered insurance broker providing specialist insurance, employee benefits, risk management and claims advice to businesses and private clients. As a next generation insurance advisory business, Partners& combines the best traditions of broking, such as technical advice and client service, with modern thinking and intelligent use of technology, to enhance the client experience and create a dynamic workplace for its talented team. The company recently received two awards, Best Diversity & Inclusion Programme and Best UK Start Up at the 2021 UK Broker Awards.
For more information, contact Malia Brown at malia.brown@partnersand.com or visit www.partnersand.com
