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Building financial resilience: How to protect your finances in an uncertain job market
By Boring Money
10 Mar, 2025
Today's jobs market looks increasingly insecure, with job losses rising in certain industries in response to global uncertainty and Budget changes. Redundancy, demotion or reduced hours can play havoc with family finances. With National Debt Week starting on the 17th March, what can you do to build resilience in your finances?
UK job market in 2025: Rising redundancies amid economic uncertainty
This is a complex moment for the UK labour market – and one that is difficult to read. On the one hand, there is undoubtedly disruption. The most recent S&P Global UK Services PMI data, which measures business activity in the services sector, showed UK service firms cutting jobs at the sharpest rate since November 2020 in February. It revealed 24% of firms cut their employee numbers in February, compared to only 13% increasing their headcount. Employment in the UK’s dominant services sector has now decreased for five months in a row.[1]
Sector spotlight: Which industries are most affected by Budget changes?
This pressure is being felt acutely in certain sectors. Lord Wolfson, head of retailer Next, says that the group’s wage bill will rise by £70m as a result of rises in employers’ National Insurance announced in the October Budget. He said this would lead to a cut in the number of employee hours worked, telling the BBC:
The axe has fallen particularly hard on those entry-level, National Living Wage jobs, and that's where the pain is going to be felt the most.
The manufacturing sector is also hurting, with the latest PMI data showing job losses rising at their steepest level since mid-2020.[2]
The latest round of job losses reflected weak demand, cost control initiatives and restructuring in response to changes in both the minimum wage and employer national insurance contributions.
The wage paradox: Some workers are doing well while others struggle
This is all pretty gloomy, but wage data presents a much more encouraging picture. The latest UK wage survey found wages rising by 5.9% per year, well ahead of inflation. At the same time, the UK’s unemployment rate was steady at 4.4%.[3]
It was a mixed picture for jobs, with employment and unemployment both rising – and vacancies having fallen every month for almost three years.
In other words, someone is doing well – and wage rises can’t just be attributed to pay settlements in the public sector. The Office for National Statistics reports that annual average regular earnings growth for the private sector was 6.2%, while for the public sector, it was 4.7%.[4]
This suggests that the labour market is splitting into the ‘haves’ and ‘have nots’. There are those in certain sectors that are facing a more precarious environment, while others are feeling flush. That said, the Spring Statement, due on the 26th of March, may bring more surprises. The government has the unenviable task of balancing the country’s budget, which could see more tax rises, benefit cuts, or both.
Spring Statement 2025: What tax changes could impact your household budget?
Shaun Moore, tax and financial planning expert at Quilter, points out that people are likely to be paying more tax whatever happens in the budget. He says:
HMRC's latest figures reveal that PAYE income tax and National Insurance contributions (NICs) receipts totalled £349.1 billion from April to January 2025, an increase of £10.3 billion compared to the same period last year. This surge is largely driven by frozen income tax thresholds, which have remained unchanged since 2021 and are set to stay in place until 2028. As wages rise, more earners are being dragged into higher tax brackets, a phenomenon known as "fiscal drag", resulting in a greater portion of income being taxed at 40% or even 45%. Without an explicit tax rise, the government is collecting more from taxpayers each year simply by keeping thresholds static.
In general, UK households are in reasonable financial shape. The household savings rate has been rising since the second quarter of 2022[5] and now sits at more than 10%. Barring the pandemic, this is its highest level since 2016. That means that households have a reasonable financial cushion should their finances come under strain.
5 essential steps to create financial resilience during employment uncertainty
That said, there are some basic rules that people can consider following to create financial resilience.
1. Pay down high-interest debt
Paying down expensive debt should be your first priority. It can be worth taking out a loan to do so, because rates will often be cheaper than for credit cards or overdrafts. It is also easier to manage.
2. Build an emergency fund
People should have emergency savings to cover three to six months’ worth of essential spending, and while the HL Savings & Resilience Barometer shows that savings have been increasing over the past six months, a third of people are still falling short. It means if you’re finding yourself with a bit more cash left at the end of the month, and you can afford to put aside a little more for emergencies, now might be a great time to start.
3. Generate tax-free income through an ISA
If you have that cash cushion, you can look to your investments to help you build financial resilience. For example, you can use an ISA to generate a tax-free income stream.
4. Restructure existing investments for income generation
Consider investing in a bond fund or an equity income fund (which invests in companies that pay dividends) to start building your income. Many equity income funds have a yield of 4-5%, and the income from bond funds may be even higher. While this may not be enough to replace the income you receive from your job, it can help get you through a few tough months or supplement your income over time.
Equally, if you have existing ISAs, it can be worth looking at the underlying holdings to see if they can be moved into income-generating assets, at least temporarily, to give you some breathing space. Most investment platforms will allow you to take the income from your investments or reinvest them.
5. Maintain pension contributions for long-term security
It is also important not to take short-term decisions to compromise your long-term security. Where possible, keeping pension savings on track as they will reap rewards further down the line. The contributions you make in your thirties and forties are more valuable than those made later on because of the effect of compounding.
This is an insecure moment, where it can feel that our financial security is out of our hands. Prudent saving and investment are the best possible ways to claw back some control.
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[1] S&P Global UK Composite PMI, March 2025
[2] Morningstar, March 2025
[3] BBC, February 2025
[4] ONS, February 2025
[5] Trading Economics, February 2025
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