Nation’s financial resilience on a knife-edge

Myron Jobson, our senior personal finance analyst, comments on the latest FCA Financial Lives survey.

Commenting on the FCA’s snapshot of its latest edition of its landmark Financial Lives survey, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “It has been a case of out of the frying pan and into the fire for many following the pandemic. Those who manage to weather the Covid financial storm have been buffeted by price rises in seemingly every area of expenditure. Now those on a financially precarious footing are facing 40-year high inflation levels, which could etch even higher once the heightened energy price cap, which came into effect this month, filters through.

“The nation’s financial resilience is on a knife-edge. The fact that one in four UK adults are in financial difficulty, or could quickly find themselves in difficulty if they suffered a financial shock, is desperately worrying. With wages failing to keep pace with runaway inflation and the lockdown savings well running dry for many Covid ‘accidental savers’, the number of people struggling to keep up with bills could rise even further in the coming months.

“The government’s cost-of-living support measures will struggle to shield the most vulnerable members from the cost-of-living crunch. The chancellor has said that ‘decisions of eye-watering difficulty’ will be made to balance the nation’s books, so there is no guarantee that cost-of-living support measures will be maintained. While government has apparently committed to keeping the pensions triple lock, it has so far failed to give a similar cast-iron pledge to uprating working-age benefits, such as Universal Credit – meaning vulnerable families face a real-term cut in benefit payments.

“It’s vital people think about how the rising cost of living could impact their financial well-being and consider what protective steps are necessary to take now. This may translate to doing an emergency budget, cutting down on non-essential spending and squirrelling away more money into a rainy-day fund if you can afford to do so.

“Those worried about being unable to meet payment obligations should contact their providers for support.”

Key findings from theFCA Financial Lives survey: 

• 8 million are finding it a heavy burden to keep up with their bills, up from 5.3 million in 2020.
• 9 million people (60% of all UK adults) across the UK are finding it a heavy burden or somewhat of a burden to keep up with their bills, an increase of around 6 million people since 2020.
• There has been an increase in people in financial difficulty, with 4.2 million people missing domestic bills or credit repayments in three or more of the last six months, up from 3.8 million in 2020.
• 9 million UK adults now have low financial resilience – one in four (24%) of all UK adults – and up more than 2 million on 2020 (10.7 million). These are people who are in financial difficulty, or who could quickly find themselves in difficulty if they suffer a financial shock. 
• Adults living in the most-deprived areas of the UK are nearly seven times more likely to be in financial difficulty than those living in the least-deprived areas; 27% of black people said they found it a heavy burden to keep up with bills, compared with 15% of all UK adults; 12% of people in the North East and 10% in the North West are in financial difficulty, compared with 6% in the South East and South West.