The looming debt crisis
You may be one of the 12.5 million UK adults who are experiencing daily anxiety about your finances, or the millions more who are seeing the impacts of the cost of living crisis on those you love or engage with in a work capacity. For months now we’ve seen headline coverage on the rising cost of living, but the subsequent debt crisis has only just begun.
Since the cost of living started to soar, CAP has commissioned YouGov to carry out polling (Both at the end of 2022 and the start of 2023). CAP’s latest polling has highlighted that 28% of adults across the UK are skipping meals and 13% are going without electricity or gas at least once a month because of costs, and this latest insight has also shone a light on the upcoming debt crisis.
Since CAP was established in 1996, we’ve been working to support people who are facing debt and financial difficulty through our free, FCA-accredited debt advice, money coaching, life skills groups and job clubs. We know debt and financial insecurity are not new issues. However, with this recent research revealing that 8% of UK adults (4.2 million people) have fallen further behind or missed payments in the last six months, unless action is taken support mechanisms will be pushed to the limit, if not beyond.
28% of UK adults are finding keeping up with bills and credit commitments a heavy burden and just under one in ten (4.9 million UK adults) have debts they don’t know how they’ll repay. This is hugely worrying.
Millions are set to face the challenges of debt and interest rates on top of mounting costs. Perhaps not surprisingly, but nevertheless a cause for concern, people on the lowest incomes and people who are currently not in full-time work are being hit the hardest. 37% of those in the lowest income group, whose household income is under £15,000 per year, are finding keeping up with bills and credit commitments a heavy burden.
Households with under £5,000 gross income per year have a 20% likelihood to have fallen further behind or missed payments in the past six months, in contrast to 10% of people who earn between £20,000 and £24,999 per year and 6% for people on a £35,000 to £39,999 annual household income.
14% of people who are unemployed have been falling further behind or missing payments, in comparison to 9% of people who are in full- or part-time work and 2% of people who are retired.
So beyond the numbers, what does this mean?
It means that millions of people are struggling to make ends meet.
It suggests that more and more of the UK population could be faced with unsustainable budgets — which means the money they have coming in is not in line with the costs of essential items.
It gives us some forewarning of the extent to which a debt crisis may sweep the nation.
Millions of people are struggling to make ends meet
Financial insecurity can force people to go without essentials — 28% of adults across the UK are skipping meals and 13% are going without electricity or gas at least monthly as a result of recent increases in the cost of living.
It puts strain on people’s relationships, contributing to 1.8 million (3%) relationship breakdowns.
It impacts mental wellbeing — 56% feel their mental health has been negatively impacted by the cost of living crisis.
It limits life choices — 3 million UK adults (6%) have been unable to progress at work or take new job opportunities, and causes many more detrimental consequences.
People across the UK are faced with the realities of these statistics every day.
Pia, a CAP client, explains what this has meant for her and her family:
‘We inherited a gas and electric meter from the previous tenants and, as there was bad debt on the house, we have a prepayment meter. We got our £66 voucher and I put it on the meter and it was gone within a week.
We only have one radiator on and we have to share baths as the hot water tank is so small. I’ve said to the landlord that we’re hardly using anything but the boiler is 19 years old. It’s inefficient. We’re finding that hard.
The cost of food is higher as well. It’s difficult, particularly with our child who has special needs.’
More of the UK population are facing unsustainable budgets
People across the UK have incomes from social security support or paid employment that are not meeting the costs of essentials.
Pia explains the situation that she and her husband are facing:
‘I don’t know how they expect people like us, the normal people, to cope. I went back to work five months after having my son and two weeks after having my daughter. We’ve both worked since we were 13. How is it that we both have a good wage, we’re never off, how can we be in such trouble?
I worry about the heating because our house is so old and single-glazed. It’s very cold and we get a lot of condensation. We will have to heat it more than most in a double-glazed house. If we have only got one radiator on now and it’s costing nearly £50 a week, how are we going to afford to heat the full house in winter?
I do worry about when it will get really cold. Luckily we are out at work all day but for the mornings we have bought a small heater as the electric is cheaper than the gas. It seems like we are going backwards. I shouldn’t have to worry about heating my house.’
The looming debt crisis
For people like Pia and the 15 million people in the UK who say that the rise in the cost of living has made them feel financially insecure, the crisis is set to have long-lasting effects. Debt is at risk of becoming a daily consequence of buying day-to-day essentials. This in turn will lead to consequences for individuals and the UK economy as a whole for years to come.
The free, FCA-accredited debt advice sector is also facing financial challenges right now, putting pressure on its ability to provide the essential services that it offers to those who are facing the burden of debt. More needs to be done to recognise and fund this support mechanism to counterbalance the impacts of increased demand and reduction in financial support.
But there is hope. You can help. Whether you work with customers and consumers or are directly involved in policy development, the decisions you make can help reduce the extent of this crisis.
Together we can minimise the devastating impact that could be caused to individuals and communities. This can be done in three ways:
- Recognise that we all need to take action to tackle the looming debt crisis.
- Put actions in place to reduce the number of people that will be forced into using credit and be pulled into debt simply because of the cost of essentials they need to survive.
- Put measures in place to resource, refer, and amplify the support mechanisms people can access such as CAP’s free, FCA-accredited debt advice.
Let’s all work together to do all we can now with foresight, rather than looking back with regret.
Further information about the polling:
CAP commissioned a YouGov Poll of a nationally representative sample of 2,220 UK adults Polling was carried out between 3–5 July 2023.
Three questions (Question 1,2, and 7) underwent two waves to increase the sample size, providing a representative sample of 4,373 UK adults.
Population figures have been calculated using ONS mid-year UK adult population estimates for 2021 of 53,188,204. Including Wales 2,488,950, Northern Ireland — 1,469,572, Scotland — 4,454,919. 84% of respondents lived in England, 4.8% in Wales, 8.6% in Scotland, 2.6% in Northern Ireland.
All calculations related to population have been carried out by Christians Against Poverty, using YouGov and ONS data.
