The credit crunch, the domino effect, and how it affects you

It would appear that the tsunami that started with the credit crunch and the near-collapse of the banking system is starting to really starting to unwind on major companies in the UK. And that should be a worry to everyone.

In the past four days, Virgin Media and BT both revealed they are to make a combined 12,000 job cuts as demand for their products and services starts is stemmed by consumers seeking to cut back on their expenses. That came after reports that world-respected hotelware maker Steelite International said it had been forced to cull production to a four-day week and make a handful of redundancies.

Tonight, JCB has revealed yet another round of cuts with up to 398 new jobs to go. This comes after three earlier rounds of cutbacks this year which have seen at least 350 jobs gone, a stripping back of production and the scrapping of the annual Christmas bonus which has been a source of pride of its workers - and envy of everyone else.

At a time when Mervyn King, Governor of the Bank of England, admitted that the UK was 'probably' in recession, it demonstrates three things.

First, the aftershocks in the banking sector that have already rippled through into construction - and construction vehicles, in JCB's case - are still only just starting to become visible in more removed sectors such as telecoms, and may have some way to go. With news yesterday that national unemployment is the highest in the UK since the New Labour government came to power in 1997, with 1.82 million out of work, it is slightly concerning that national, and local unemployment could still rise far further.

In recent times, and largely because the region has more jobs locked up in manufacturing industries than other areas, Stoke-on-Trent joblessness has been traditionally had slightly higher than average, and at the moment 3.6 per cent of the city's population are looking for work. That said, it is still lower than Sandwell, Wolverhampton and Birmingham, where claimants of unemployment benefit account for 5.7 per cent of the population of working age people.

Secondly, the depth of the recession still to come is still uncertain. As I've said before, JCB is generally seen in UK business as a good, solid manufacturing company, with a management able to take swift corrective action to ensure its business is shaped for the economic climate in which it has traded.

Yet, the company's management - as with many central bankers and politicians trying to wrestle the economy back to normality - appears to have either completely mis-judged the scale of the fall-off in demand, or has seen a greater drop-off in orders even as bosses discussed making up to 700 staff locally redundant.

Thirdly, that if JCB, with its global scope and financial clout cannot accurately judge how it should react to the shockwaves hitting the economy, then other companies and individuals need to ensure they do everything that they can weather what could be turbulent times ahead.

I've said before that companies like JCB and Bentley Motors support not only their own workforces, but a raft of smaller suppliers who keep their production lines stocked up with parts. These firms need to be weatherproofing against the eventuality that their major customer(s) could slash orders to save their own precious cashflow during these sparse times.

Similarly, homeowners need to be thinking how the knock-on effects of this companies news could affect their own status.

True, oil is now hovering around the 60 dollar a barrel mark, compared with 120 dollars less than eight weeks ago, and commodity prices are sliding from their pre-credit crunch peaks.

But it is always worth squirrelling away some cash to make sure you've got a cushion in the event of a personal disaster such as redundancy. Experts such as website Motley Fool and savings expert Martin Lewis both reckon you need to pay off your debts and save the equivalent at least six months cash - just to be sure.