Source: Finance Derivative
By Guy Kashtan, co-founder & CEO of Rewire
As inflation in the UK hits a 40-year high, millions of people are being forced to cut their cloth accordingly. News stories of people struggling to afford even the most basic of commodities seem to be everywhere. And the situation only looks set to deteriorate, with the Bank of England predicting inflation could climb from 9 per cent – the highest it’s been since 1982 – to 11 per cent.
The effects on communities across the UK have been swift and far reaching. Citizens Advice, for example, said only last month it had referred on average more than 750 people a day to food banks. And so far this year, the charity has supported almost 30,000 people with energy debts – 26 per cent more than in 2021. Meanwhile, the situation extends beyond just the UK. A new 11-country Ipsos survey by the World Economic Forum in May 2022 shows that a quarter of people are struggling financially.
Those from the lowest income bracket – which includes many migrant workers and their families – are feeling the effects disproportionately. According to the Institute for Fiscal Studies, in April 2022 the lowest 10 per cent of the population in terms of income faced an inflation rate of 10.9 per cent. This was 3 percentage points higher than the inflation rate of the richest 10 per cent. Most of this disparity stems from the fact that the poorest households spend 11 per cent of their total household budget on gas and electricity, compared to 4 per cent on average for the richest households.
This could not come at a worse time. The UK is dealing with an acute labour shortage after around 1.3 million foreign workers fled the UK at the height of the Covid-19 pandemic. This was compounded by the fact that net migration also fell considerably during this period. Figures from the ONS show that net migration in 2020 was only around 34,000 people, representing an 88 per cent decrease when compared with the 2019 figure of 271,000.
Then followed the ‘Great Resignation’, which saw millions of workers resign en masse as they sought out new career paths. Sectors from hospitality and retail to food and drink, manufacturing, construction, and transport all took a major hit. Many of these industries are still recovering, culminating in the widespread disrupted services and volatile market prices we are currently experiencing.
And, sadly, migrants’ crucial role in supporting our economies – and the economies of their home nations – is still overlooked. Instead, many people revert to an outdated, negative perception of migrants as a drain on the economy and a barrier to local employment. This is far from the truth. And if we put the right support in place, to enable migrants to actively participate in economic activities, then they can have a positive impact on the economy of their host nation. Through financial services that address their unique cross-border needs, they can also better support their families back home, and contribute to the economies of developing countries.
Migrants help strengthen the workforce by plugging gaps in industries where there is a relative need for workers. The supply chain sector is one example – arguably one of the most affected sectors in the current inflation storm. They help host nations meet labour shortages while spending wages locally, and contributing to economies back home, where they still have family ties. But they need the right financial tools in order to be able to do this effectively. Banking across borders has traditionally been a very expensive process, but even more so in recent times with the faltering pound.
Unfortunately, migrant workers have been seriously impacted by the pandemic, and are now dealing with an even more uncertain economic situation. Inflation has eroded the value of remittances and the ability of migrants to support their families and loved ones back home. This is damaging both to the host and home country.
Access to affordable cross-border financial solutions – such as digital wallet Rewire – have become more important than ever. Fintech solutions have democratised once complicated, expensive financial processes that can now be completed at the swipe of a finger. Migrant workers, who may not have gained the financial knowledge needed to make use of traditional banking products, are finally able to access services which many of us take for granted – debit cards, local payment accounts (IBAN) and insurance products – all in their native language, which saves time and hard-earned money.
With issues around inflation only set to be compounded over the coming months, a shift in perceptions is needed. Migrant workers should be recognised for the value they can bring to the economy, not just ‘at home’, but locally too. And fintech has an important role to play in helping underbanked populations play a more active part in the economy. As well as boosting economic activity at home and abroad, we can help migrants, and other financially underserved populations, better manage their finances and plan for the future.
