Regulator the Financial Conduct Authority (FCA) has published selected data from its latest Financial Lives survey on vulnerability and financial resilience, and insights into the financial positions of UK consumers in May 2022. This data contributes to the evidence base on the rising cost of living.
Financial Lives is FCA’s flagship survey of adults aged 18 and over across the UK and provides a wealth of information about the financial products consumers hold, their experiences with financial services providers, and their financial situation and resilience. It is unique in the combination of its design, its breadth (around 1,300 questions covering all the retail sectors that FCA regulates) and its size (over 19,000 respondents in the latest wave). As a tracking survey, it provides evidence of how things are improving, worsening or staying the same, from the point of view of the consumer. The data also provides valuable insights for the financial services industry, the Government, policy-makers, consumer bodies and academics. FCA has conducted three Financial Lives surveys – in 2017, 2020 and 2022. The full 2022 report will be published in early 2023.
- In May 2022, 12.9 million UK adults had low financial resilience – 1 in 4 (24%) of all UK adults. These are people who are in financial difficulty, or who could quickly find themselves in difficulty if they suffer a financial shock, because, for example, they have little to no savings or are heavily burdened by their domestic bills or credit commitments.
- This result is much worse than recorded in our February 2020 Financial Lives survey. At that time, 10.7 million adults had low financial resilience, 2.2 million fewer than in May of this year.
- The main reason for this increase is a large jump in the proportion of adults who say they are heavily burdened by their domestic bills and credit commitments: 7.8 million adults (15% of all adults) felt this way in May this year, compared with 5.3 million adults (10%) in February 2020. This is not surprising, as there has been a significant increase in the cost of living in the latter half of 2021 and in 2022.
- There was not as large an increase in the number of UK adults already in financial difficulty – those missing domestic bills and credit commitments in 3 or more of the last 6 months: 4.2 million in May 2022, compared with 3.8 million in February 2020. As many adults are already heavily burdened by their debts, this is expected to increase.
- Part of the reason why many more people are not already in financial difficulty, despite the increased burden they face keeping up with domestic bills and credit commitments, may be due to savings accumulated during the pandemic. Financial Lives data on investible assets and debt levels shows that many adults – particularly those in higher income brackets – managed to increase their savings over the 2 years to May 2022.
- There are stark differences in our results across different demographic groups. Consumers who were female, younger, unemployed, working in the gig economy, renters, or in an ethnic minority group, were more likely in May 2022 to have low financial resilience or be in financial difficulty.
- There are also geographical differences. For example, people in the North East and North West are much worse off in May 2022 than those in the South East and South West. Adults living in the most deprived areas of the UK are nearly 7 times more likely to be in financial difficulty than those living in the least deprived areas.
- There are some signs too in the May 2022 data that many more people than those we describe as having low financial resilience are not well prepared for considerable increases in the cost of living. For example, 24.0 million UK adults (45%) were already finding it somewhat of a burden to keep up with their domestic bills and credit commitments. And half of this group didn’t have savings to cover 3 months of expenses, which many experts recommend as a buffer.
- Low financial resilience is 1 of the FCA’s 4 drivers of vulnerability. Its increase has helped drive up the overall proportion of UK adults with characteristics of vulnerability from 46% to 47%, or from 24.0 million to 24.9 million, between February 2020 and May 2022. The other drivers are poor health, recent negative life events and low capability.