United Kingdom

Worrying rise in consumer debt whilst Britain struggles with downgraded economy

November 2017


Half of the UK population are "financially vulnerable", the Financial Conduct Authority have warned, following a major household survey of 13,000 consumers.

The Financial Lives survey looked into the financial health of people across the UK with a particular focus on consumer debt. The results showed strong evidence of a growing debt problem.

According to the survey:

  • One is six would not cope with a £50 increase in monthly bills
  • 4.1 million people are already in serious financial difficulty
  • 50 per cent of UK adults are deemed “financially vulnerable”.
  • Just under 8 million find keeping up with bills a ‘heavy burden’ and regularly miss credit payments and bills.

In addition, the report highlighted a generational divide with the over 65s being significantly less likely to be in financial difficulty than 25-34 year olds and had an average of £45,000 in savings.

Just 19 per cent of 25 to 34 year olds had no savings at all and 30 per cent had less than £1,000 saved in total. 36 per cent of this age group had also become overdrawn over the last year and 37 per cent had used payday loans in the past.

Commenting on the findings, Chris Woolard, FCA strategy and competition director described the research as the “first, comprehensive snapshot” of the “size and scale” of current consumer debt.

Chris McWilliam, principal consultant at Aon Employee Benefits said: “Financial worries have a direct impact on workplace productivity, with 89% of employers agreeing that financial concerns have an impact on employees’ workplace performance, according to the FCA’s March 2017 report, Financial Well-being in the Workplace: A Way Forward

“We are finding that more employers are looking at ways to support their workforce effectively manage their day-to-day finances to help prevent them from getting into debt problems, either through online tools, financial education sessions or a mixture of both. The same report revealed that there’s an estimated 4% being added to payroll costs caused by absenteeism and presenteeism from financial distress, so there are good financial as well as altruistic reasons for employers to provide practical support for their workforce.”

The latest research comes as the Office for National Statistics published revised figures which show the scale of the UK’s own debt problem. According to the ONS Blue Book, figures reveal there is a £490bn gap in the economy, equivalent to 25 per cent of GDP.

Speaking to Nick Ferrari on LBC Radio earlier this week, Gemma Godfrey from investment website Moola said experts had believed there was a £469bn surplus although the UK actually has a £22bn deficit.

“Foreign investment has been slightly supported by existing commitments, so it hasn’t really fallen down until recently,” she explained. “And people have been buying a lot sterling because they thought the pound was going to rise. But again, that’s quite fickle.”

The billion-pound blackhole comes as Brexit talks with the EU recently reached ‘critical level’, with PM Theresa May flying to Brussels for emergency talks in a bid to progress with the negotiations.

The figures remove the UK’s net reserve of foreign assets, the safety margins over Brexit. “It puts us in a weaker position when we are going into Brexit talks,” Godfrey added.



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