Report Finds Nearly 60% Jump in UK Households in Serious Financial Trouble
One in six United Kingdom households (4.4 million) are now in “serious financial difficulties” compared to one in 10 (2.8 million) in October 2021 – an additional 1.6 million households, according to a survey analysis by academics at University of Bristol’s Personal Finance Research Centre.
The analysts said this is worse than any point during the pandemic. Of those 4.4 million in serious financial difficulties, to make ends meet 71% have reduced the quality of food they eat, 36% have sold or pawned possessions and 27% have cancelled or not renewed insurance.
Half of all households (51%) now consider their overall financial situation to be worse than at the start of the pandemic. When the same question was asked in October 2021, just one third thought their situation had deteriorated since March 2020.
The Coronavirus Financial Impact Tracker, commissioned by the Financial Fairness Trust (part of the investment firm abrdn) and analysed at Bristol, has been monitoring the personal finances of households since the start of the pandemic (sample around 6,000 people).
Since the last survey (October 2021), single parents have seen the greatest decline in financial wellbeing, with the proportion in serious financial difficulties rising from 23% to 37%. Other groups particularly hit include social renters, private renters and households with two children (all with a rise of more than ten percentage points). In addition to the 4.4 million in serious financial difficulties, a further 20% (5.7 million) are struggling financially. As a result, 36% (or over 10 million) of UK households are facing significant financial hardship (either in serious financial difficulties or struggling).
Researchers found that the vast majority (82%) had tried to do at least something to counteract rising energy prices. People were using a variety of methods to tackle rising energy bills, since the start of January 2022, with 60% avoiding turning on the heating.
Another way people are trying to reduce outgoings is reducing their pension savings. The report found that 21% of those for whom their main income is from the ‘gig economy’ had stopped or reduced pension contributions. The numbers are lower for those who are self-employed (12%) or have at least one earner (9%), however, even these lower figures could have long-term significance for financial resilience, according to the analysts at Bristol.
The research shows some geographic variation in rates of households in serious financial difficulty. While overall 16% of UK households are in serious difficulties, this rises significantly to 22% for Wales, 21% for Scotland and 20% for the North East of England.
Looking to the next three months:
- Half (50%) of households are worried about their ability to meet their gas or electricity bills.
- Two in five (39%) are worried about their ability to cover food costs.
- Three in ten (29%) are worried about their ability to meet their housing costs (rent or mortgage).
- Nearly six in ten (58%) are very/quite worried about their financial situation, especially disabled households (72%) and those on receiving or applying for benefits (77%).
“Lots of people are cutting back to cope with the cost of living crisis. What really surprised us was how many people are cutting back and the variety of methods. What is particularly worrying is that people are potential storing up future financial problems for themselves, by cancelling insurance or cutting their pension contributions,” Professor Sharon Collard, chair in Personal Finance at Bristol, commented.
This analysis is based on data taken from a YouGov survey of 5,716 people. It was commissioned by abrdn Financial Fairness Trust for its financial impact tracker series, conducted from 25 May to 6 June 2022 and analysed by the Personal Finance Research Centre (University of Bristol). This is the sixth wave of the survey.
Approximately 40% of respondents had completed the survey prior to the Government’s announcement of new measures to address the cost of living crisis on 26 May.
Researchers explored whether there was any significant changes in respondents’ attitudes or confidence in future financial situation depending on whether they had completed the survey after the announcement or not. This showed no significant change, even when controlling for the changing profile of respondents over time.