Recession And Repossession: Surviving A Great Fall

Some of us remember the last recession: that awful period of reckoning from 1989 to 1992 that followed the excesses of the mid-1980s. It felt like a ghastly hangover after an overindulgent party, but it lasted much longer than a day and needed far more than an Alka-Seltzer to cure. Blameless, hard-working people lost their jobs, their homes and their credit ratings. For some, the pressures were so great that they lost their marriages too. And the worst of it was that it wasnt even their fault.

It is the helplessness, the feeling of being at the mercy of circumstances, that most characterises the horror of recession. You can be the hardest worker, the most conscientious borrower and still you can be laid off or your home repossessed, sometimes both. It is like an act of God: as if a tornado has ripped through your town, uprooting buildings you have known all your life, whisking you in the air and dumping you, bruised and shocked, on a patch of wasteland far from home.

If we were to enter a recession, perhaps a global credit crunch could start it off. Or perhaps a sharp rise in the price of oil, or perhaps because the Government has been spending too much. (At the moment, we have all three.) Interest rates rise to stave off inflation, so businesses get squeezed and have to cut costs by reducing their workforce. The fewer people there are in work, the less money there is washing round the economy, so business profits fall still further and they cut even more jobs. Thus begins a downward economic spiral.

At the same time, higher interest rates make mortgage and loan payments more expensive. People who borrowed heavily in the good times find themselves falling behind with their repayments. If they are really unlucky, their home gets repossessed. At worst, if house prices have fallen, they may find themselves in negative equity, meaning that the proceeds of their house sale are not big enough to cover their mortgage, so they are still thousands of pounds in debt even after their home has been forcibly sold.

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During the last recession, more than 600,000 homes were repossessed and 120,000 people were declared insolvent. Unemployment rose by 50 per cent in just 18 months, peaking at 2.6 million in 1991.

The people I spoke to who suffered during the last recession describe their feelings of anger, depression and hopelessness as these disasters descended upon them. Even if they knew it wasnt their fault, it was hard for them to escape without a giant blow to their confidence. And it can be harder still to find another job, as there are hundreds of thousands of other people also looking for work, and few employers willing to take anyone on.

If this all sounds unremittingly gloomy, then Ive done my job. For, apart from bailiffs and debt-collectors, there arent many people who thrive in a recession. Pensioners should be fine, since their income is guaranteed. Otherwise, the best you can hope for is to keep your head down, keep your boss happy and have the good fortune to work for an employer that doesnt suffer too badly in the chilly economic climate.

What else can you do to prepare yourself now, should a recession bite? The most critical thing is to rein in your spending and borrowing (though the irony is that, if we all do that, we will make the likelihood of a recession even greater). Dont take on new debts, pay off the ones you can, and look at ways in which you can save money. If this means joining the ranks of people who bring in their own sandwiches in a Tupperware box, tell your colleagues you are in the fashionable vanguard of “the new frugality”. Equally, it is amazing what bargains you can pick up in charity shops. I am proudly wearing a £20 Zara suit (courtesy of Oxfam), and my much-admired black velvet Christmas party dress cost just £15 (ditto).

If you start to get into difficulties with your mortgage repayments, dont stuff the envelopes into a drawer: get in touch with your lender and try to negotiate a deal that will prevent you losing your home. And if you lose your job, dont be afraid to settle for another paying less - its still better, psychologically and financially, than going on the dole.

Most of all, dont despair. As my interviewees bear witness, there is life after recession. One couple - Tim and Robyn Jones - are now rich beyond their dreams. All felt that they had learnt from the experience. Perhaps the most important lesson is not to be too hard on yourself. For a serious economic downturn, like a tornado, is indiscriminately cruel. It catches anyone who happens to be in its wake.

Gill Marsh: lost marriage, business and house

If a film were made about Gill Marshs life, her character would surely be played by Julie Walters. She has the same twinkly eyes and a determined, but slightly sad, set to her jaw. Her face tells her story: it is one of deep suffering matched by pride at having fought her way back. In 1986, at the height of the Lawson boom, Gill and her husband, Tony, decided to use the Governments £40-a-week Enterprise Allowance to start their own road-haulage company. They borrowed money from the bank and the business prospered enough for them to buy their first home, outside York, for £60,000. Confident of their prospects, they used their house as collateral to their business debts.

Within a year, interest rates had soared, their mortgage payments nearly doubled, their marriage broke down and their business lost a big contract. “From then on it went downhill and downhill,” Gill relates. “The main debt was against the house. The business folded. The bank took the house. I was left with nothing. I didnt have a car, didnt have a house. I had no income. I had my son, though.”

So, from being a home-owning, married businesswoman, Gill turned into a single mother on benefits. She and her eight-year-old boy were even threatened with moving into B&B accommodation. “That is what really, really terrified me. I just had these visions of drug addicts and down-and-outs and the single mum that I was going to become.” Luckily, the housing officer took pity on her and found her a decent council flat.

She felt angry and depressed. “It wasnt that I was a bad debtor, it was that circumstances were out of my control. The interest rates at that time were very, very high so there was no way, even if I had got full-time work, that I could have paid the mortgage. I was very distressed. I felt I couldnt see the light at the end of the tunnel. I didnt know what my future was going to bring. Some days I didnt want a future, I just wanted to curl up in my bed and put the sheet over my head and not face the world.” But, with an ex-husband paying no maintenance, she had to keep going for the sake of her son, Billy. She was lucky enough to find a job with a building society and has clawed her way back from there. A friend started an estate agency and offered her a job as a valuer. Then she was taken on by a big estate agent. Now she has remarried, bought another house, and is managing an estate agency branch. Poignantly, one of her tasks is to sell on houses that, like hers, have been repossessed. “I dont like it. I think its very, very sad. Having experienced it, I know what its like.”

But, horrible though the recession was for Gill, 55, she feels good about having surmounted all the obstacles it threw at her. “I feel a much stronger person. Its things like this that make you the person that you are. I look at myself now, and I think, ‘Wow, you can do it girl - you have done it!”

Penny Hayes: made redundant and then became a potter

Penny Hayes, 59, loved the decade of excess that was the 1980s. “My sister lived in Texas and I can remember popping over to see her for the weekend. Champagne was my favourite beverage.” As marketing director of a video production company, her outfit of choice was a bright red jacket with shoulderpads. “It made me stand out in a roomful of men.”

It is hard to imagine her now as she was then. She is gentle, soft-spoken, bespectacled and low-key, apart from a slightly arty brooch. Then she was a high-flying urban executive; now she is a reclusive country potter wondering what to do next with her life.

It was in the early 1990s, when Penny was earning £35,000 a year, that her salary cheque bounced. “Video production for marketing and corporate promotions just collapsed during the recession. So the company started to suffer quite seriously with a cashflow problem.” She sat down and talked to her boss, and agreed that she would carry on working for no pay in exchange for a share in the company. But the agreement was never put down in writing and, after three months of employing her for nothing, her boss reneged on it.

“He just said, ‘I dont want you to come in any more. Being in marketing, youre always the one out there working really hard to keep everyone else in work and when things get bad youre always the first to go.”

Penny had always thought that, if money were no object, she would go away and make pots. She had kept up her interest in ceramics at evening classes and decided to turn her misfortune into an opportunity to follow her heart. So she signed up for a fine art degree at the University of Hertfordshire.

“I had a strange sensation that at last, I was me. I had been all these other people: a mother, a wife, a marketing person, and suddenly I was just doing what I wanted to do for me. It sounds terribly selfish, but it wasnt really like that, it was just that I hadnt really thought about what I personally wanted. I dont think a lot of people do.”

So she threw herself into the art world. “I went for it full hog, I became ‘An Artist. It changed the people I mixed with, everything I did, my whole outlook.” She set up a studio in her garage, tried to get exhibitions and sold the odd piece here and there. “But its a funny world, ceramics, because it doesnt fit into any nicely organised box like fine art. People tend to think, ‘I can buy a mug in Woolworths for £2.50 so why should I buy yours for £10? Just because its a one-off, it isnt valued any more than a mass-produced thing. People dont query paying two or three thousand pounds for a painting, but they do for a piece of ceramic, and yet mine probably costs more in materials and time, and needed the same amount of training to get to that point.”

By this time, her husband was stuck at home, on disability benefit, suffering from rheumatoid arthritis. They just about survived financially, with Penny topping up her income by doing some adult education teaching. But sadly, he died just before Christmas, and now she doesnt know what to do.

The bungalow is up for sale, and Penny has applied for jobs with no success. “Ive been out of the work market since 1993 and unless I work in a shop or something I dont think I can get a job now. If I put that my last employment was marketing director of a media company, I dont think there are many people who would even want me stacking shelves.” She saw a job advertised last week, just like her old one in marketing, paying only £30,000 - £5,000 less than she was earning 15 years ago - but she knows she would not be qualified as she has lost touch with that world now.

As she concludes, rather ruefully: “Life has this habit of turning another corner when you least expect it.”

Robyn Jones: made redundant, now millionaire

Several years after Robyn Jones, 46, was made redundant in the last recession, she sent her former boss a thank-you letter. He was amazed: it was the first time anyone had thanked him for laying them off. But Robyn, recently named Credit Suisse Outstanding Woman in Business, needed the impetus of redundancy to become an entrepreneur.

She had been general manager for a large construction firm on a £30,000 salary, and had recently bought a bigger house with her husband, Tim, when she lost her job in 1991. He was still working as a finance director and they calculated that if she could bring in just £10,000 to £15,000 a year they could still cover their mortgage and survive financially. So she set up office in the spare room on a wallpaper pasting table, with bare boards on the floor and banana boxes for filing cabinets - and she hit the phone. The idea was to start her own contract catering company with her husband. He would carry on with his accountancy job by day and do her books at night.

“My confidence was very low to start with,” she admits. “And it was difficult because we had no sites that a potential client could visit.” For six months, she sat at her desk making cold calls from the telephone directory.

Worried that she was earning nothing, she offered herself to catering agencies as a cook and waitress. But, after six months of hard sell, she finally got a contract to do the catering at a residential centre for Guide Dogs for the Blind.

Just two years later, the company won the Booker Prize for Excellence in two categories: Best Young Business and Best Caterer. Business took off. Now Charlton House Catering Services has a £75million turnover, employs 1,900 people and has 180 clients including the Treasury, Network Rail and Sony. Tim is full-time chairman and Robyn is chief executive. Tim, as befits an accountant, is more naturally cautious than Robyn and is already gearing up mentally for the possibility of another recession.

“You always have to have a Plan B,” he says. “You have to know what you would do if the worst happened,” he says

The company has barely ever needed to borrow money, though, and it insists that its clients pay in advance, at the beginning of each month, to aid cashflow. His advice to people facing a recession now? “The most important thing is to live within your means.”

Tommy Cloherty: house repossessed

In 1985, at the age of 21, Tommy Cloherty went back to London from Ireland “with the idea of making loads of money, getting rich - the usual. I was quite ambitious.” He was marking time working in a restaurant in Highgate, North London, but had grander plans. “I thought it would be something with languages because I speak Italian and French.”

When his sister came over to join him, they decided to buy a flat together. “When I look back now I think, Why did I buy a place? But I think it was the peer pressure. If everybody else is doing it you think, Why arent I doing it?” Everything was fine until his sister lost her job in 1989. “We were really stretched,” he remembers. “About 40 per cent of our income was going on the mortgage.” Whats more, the mortgage rate was fixed for the first two years, but then it shot up.

Tommy started working “like a hamster in a wheel”. He did double shifts at the restaurant - from 9am to 2pm and then from 6pm to 11pm, and in the afternoons, he took on gardening and building jobs for friends. But it wasnt enough. “The letters kept arriving and Id get the mortgage repayments up to date and then the council tax letters would come and then the credit card would come in. I was constantly juggling.” So he left the restaurant to try to make more money selling insurance. But that turned out to be even less lucrative.

He borrowed money from relatives and went back to working in the restaurant. “But it just wasnt enough and I remember as the date for repossession of the flat was looming, the letters were getting more and more severe and more and more threatening.” He had taken out indemnity insurance, costing £900, which he thought was supposed to protect him against repossession. But the small print failed him. In the end, the flat that they had bought for £69,000 was sold by the mortgage company for just £27,000, leaving Tommy and his sister liable to the tune of £47,000 after accumulated interest and fees.

“It was horrible,” he recalls. “It went on and on and I never knew what the outcome would be. I remember a friend said, ‘You didnt smile for six months. There comes a point where youre exhausted: physically, mentally and emotionally.” By then, his sister had a baby, and the three of them were put up in bed and breakfast accommodation, with a tyrannical landlord who would arbitrarily shut the kitchen just when she needed to warm her babys bottle. “We had two small rooms with the cot in the corner and all the clothes piled up.” Eventually they were given a council flat in a tower block in Edgware, northwest London, but they were still being pursued for debts. Tommy and his sister were never able to pay them, and the letters only stopped coming a couple of years ago.

Now 43, he works as the manager of a homelessness project, lives in a rented flat and has vowed never to buy a property again.

“I value peace of mind and a wife that I love and its good to be off that treadmill. I look at other people and remember how easy it is to get sucked into it all. But when Im 70, Im not going to think I didnt work hard enough or have a big enough house. I care more about family and friends and memories.”

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