New research shows that one in six UK households are in ‘serious financial difficulties’ in a dramatic rise since last autumn.
The research by abrdn, analysed by Bristol University researchers, found 4.4 million households were in this position, up 60% compared to October 2021.
Single parents had seen the biggest decline in financial wellbeing, with the figure rising from 23% to 37%. Social renters, private rents and households with two children had all seen a rise of over 10 percentage points.
A further 5.7 million households (20%) were found to be struggling financially. Meanwhile, 51% of households now consider their overall financial situation to be worse than at the start of the pandemic.
Looking ahead to the next three months, 50% of households are worried about their ability to meet their gas or electricity bills. The rising energy prices have led to 82% of households trying to make savings, with 31% reducing the number of showers or baths, 60% avoiding turning on the heating, 24% heating only part of their home and 33% reducing the use of the oven.
Some people had reduced their pension savings to cut costs. 21% of people in the gig economy had stopped or reduced their pension contributions, and 12% amongst self-employed people.
Mubin Haq, CEO of abrdn Financial Fairness Trust, said: “The latest findings from our survey starkly show that people are facing a significant squeeze to their finances. This is the first substantial deterioration we have seen since tracking people’s finances when the pandemic started.
“Times are tough for everyone, but it’s those on the lowest incomes who are particularly feeling the effects of rising prices. Many of the measures brought in by the government were welcome and generally well-targeted though as our analysis shows that is not always the case as highlighted by the council tax rebate. More worryingly these are short-term remedies.
“Wages have largely stagnated and are no longer keeping pace with inflation and social security is lower in real terms than it was over a decade ago. A more comprehensive and longer-term plan is urgently needed to ensure living standards do not sink even further.”
Professor Sharon Collard, Chair in Personal Finance at Bristol, said: “Lots of people are cutting back to cope with the cost of living crisis. What really surprised us was how many people are cutting back and the variety of methods. What is particularly worrying is that people are potential storing up future financial problems for themselves, by cancelling insurance or cutting their pension contributions.”
The perilous state of the UK public’s finances was also surfaced by the Hargreaves Lansdown Savings and Resilience barometer, released earlier this month.