Consumers are increasingly worried about their money as the prospect of mass unemployment looms over the next 12 months.
British households are increasingly worried about their finances as the country weathers the economic crisis caused by coronavirus.
The IHS Markit UK Household Finance Index, which tracks consumers’ feelings about their money health, fell from 41.5 in July to 40.8 in August.
Consumers are also negative about their finances over the next 12 months, and most think their finances will have worsened by August 2021.
Lewis Cooper, Economist at IHS Markit, says:
"The latest survey data highlight a continued strain on the finances of UK households. The 12-month outlook for finances remained highly negative amid substantial uncertainty surrounding the economic impact of the Covid-19 pandemic.”
Lower wages and fears about unemployment are causing this depressed mood. August Markit data showed another sharp reduction in income from jobs.
It also showed negative perceptions about job security. Households were the most positive for the past five months, but still more pessimistic about job security than at any time since April 2011.
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Thousands of workers have been made redundant since the start of the pandemic, with those in hospitality and retail worst hit.
The government’s job retention scheme, which continues to pay 80% of the salaries of 9.6 million workers, is due to end in October.
Individuals have been cutting non-essential spending in response, which fell again in August.
The latest survey data also showed a fall in the amount of cash available to UK households, and a growing need for unsecured borrowing such as overdrafts and credit cards.
UK Finance today says outstanding credit card balances fall by 12.6% in the year to May, as worried consumers chose repayment over spending, but that outstanding debt then rose by £1 billion compared to April.
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Taylor Flynn, head of marketing at Creditfix, an insolvency firm, says: “As the hospitality industry reopens and restrictions ease further, this is the time for people to rethink their spending strategy and not rush themselves by doing too much too soon.
“Individuals should start by getting on top of their finances first, paying off any debt and easing the financial strain this brings with it.
“With better management of their personal finances in addition to being sensible about expenditure, individuals will be able to spend money without the guilt and stress associated with living beyond your means.”
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