Given the economic uncertainly following the UK’s vote to leave the European Union, protection experts Drewberry Insurance is advising employees to put in place a financial plan to limit the financial impact of possible future redundancy
On Friday, after it was announced the leave campaign had won the referendum, credit ratings agency, Moody’s cut the UK’s sovereign credit rating to negative from stable, stating that the Brexit result heralded “a prolonged period of uncertainty for the UK, with negative implications for the country’s medium-term growth outlook” (1).
A natural solution to this risk would be Unemployment Income Protection Insurance (2), which could payout a monthly benefit for up to one year to cover essential household bills should the policyholder suffer forced redundancy.
It is vital that any workers wishing to gain this protection do so before any announcement of redundancies has been made at their company, or they may not be eligible to take out cover.
How real is the risk of redundancy post-Brexit?
Prior to the referendum, meeting notes on 16th June from the Bank of England’s Monetary Policy Committee stated:
“A vote to leave the EU could materially alter the outlook for output and inflation, and therefore the appropriate setting of monetary policy. Households could defer consumption and firms delay investment, lowering labour demand and causing unemployment to rise.” (3):
Since the referendum result, the Institute of Directors (IoD) has released the results of a survey of just over 1,000 of its business leader members, showing that 23% of those surveyed were putting a freeze on hiring and 5% would be making redundancies. In addition, 22% of members were now considering moving some of their operations outside the UK (4).
Don’t leave it too late
In the last recession following the collapse in global credit markets, the UK’s unemployment rate rose from a pre-recession rate of 5.2% in April 2008 to a peak of 8.5% in October 2011, amounting to a 63% rise in the proportion of workers out of work (5). This rate has subsequently fallen back to 5% (March 2016).
On the of use of unemployment insurance in the last recession Drewberry director, Tom Conner said, “During the last recession redundancy insurance became an extremely popular policy as workers tried to mitigate the financial risk of losing their job.
“Unfortunately many people didn’t start looking for this cover until their company had already announced redundancies, at which point it is too late to take out cover with most providers.
“If you know there is a real possibility of being made redundant then great care is needed when looking for unemployment plans. With some insurers a company announcement of redundancies in the press is enough to make you ineligible, whereas with other providers you would need to have received a formal letter stating that your job is at risk.
“If there are rumours of redundancies at your place of work and you are at all unsure if you would be eligible, speak to an adviser who can confirm the eligibility criteria with each insurer to see if it’s still possible to take out cover. Even better still, if you’re worried about redundancy take out cover before it gets to that stage.”
Notes to editors