More than 50% of UK adults are ‘financially vulnerable’
A recent survey by the Financial Conduct Authority shows that over half of UK adults have been heavily impacted financially by the Covid-19 crisis.
The FCA Financial Lives Survey has revealed that as many as 1 in every 2 adults in the UK is struggling with money.
This report was carried out in 2020 and shows that 52% are now considered to be ‘financially vulnerable’ in some way due to the impacts of Covid. The survey was taken in February 2020 and then another in October 2020, six months from the start of the pandemic.
The impacts of Covid-19
Between the months of March and October 2020 during the peak of the pandemic, the number of adults classed as ‘financially vulnerable’ increased by 3.7 million. This is an increase of 15% since records taken in February, which takes the overall ratio to over 53% of UK adults.
The main cause for the increase was from negative events, such as redundancy or a reduction in working hours and pay.
The overall impact of Covid-19 on adults financial circumstances
Some other areas that were identified showed that 1 in 3 (15.9 million) expected their income to drop in the next 6 months. A further 25% of the population (13.2 million) expected to find it difficult to make ends meet.
A further 5.6 million people were reported to be experiencing food poverty and were likely to use a food bank. Also, 17.9 million were expected to be cutting back on essential goods.
The data also showed that 8.1 million UK adults were likely to take on higher amounts of debt from the pandemic. Conversely, there are 14% of people reported to be financially better off financially.
The period between March and October 2020 saw 1 in 6 of all UK mortgage holders (3.2 million) take a payment holiday. A further 2.6 million (14%) were considering taking a payment holiday in October.
Categories of people likely to take a payment holiday in October 2020
|Adults exceeding debt in February||46%|
|People who lost jobs due to Covid-19||37%|
|Employees forced to reduce hours to look after children or become a carer||31%|
|Employees with reduced hours||30%|
|Contract, temporary, or agency staff||26%|
|Furloughed employees or paid leave||26%|
|18 to 34-year-olds||22%|
Around a fifth, (19%) of adults with credit or loans took a payment holiday (deferral), while half (49%) of people holding high-interest short-term credit (e.g. pay-day loans). A third (32%) stated that they would have struggled if deferment schemes were not available.
Shopping around for financial products
Another impact of Covid-19 is that consumers are far more likely to shop around for financial products. There has been an increase in the number of people switching insurance providers and closer attention paid to policy details.
|Number of people who were more likely to shop around for insurance products in the future||1 in 3 (33%)|
10% of people who have never shopped around before
|Number of people who are likely to shop around for financial products, such as savings accounts, ISA’s, current accounts||3 in 10 (29%)|
13% of people who have never shopped around before
|UK adults with insurance or personal protection products who have switched to another provider to reduce the cost||1 in 6 (17%)|
24% of adults who lost their jobs because of Covid
|UK adults with insurance or personal protection who have reviewed their policy because to improve their cover||1 in 8 (12%)|
8% of people have renewed a policy with changes in terms and conditions
Read the full report – Financial Lives 2020