• Wednesday, May 29, 2024

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Cost-of-living crisis: FCA survey reveals improvement in financial struggles

People shop at a grocery store in Chinatown on February 9, 2024 in London, England. (Photo by Carl Court/Getty Images)

By: Pramod Thomas

PEOPLE from ethnic minority backgrounds and women are still struggling to cope with the cost-of-living crisis, along with other groups, though the situation has improved over the past year, a new survey released on Wednesday (10) revealed.

The Financial Lives cost-of-living survey by the Financial Conduct Authority (FCA) found that 7.4 million people were struggling to pay bills and credit repayments in January this year, down from 10.9 million in January 2023.

However, that number is still higher than the 5.8 million recorded in February 2020, before the cost-of-living crisis started.

According to the survey, 39 per cent of adults from an ethnic minority background are struggling and not coping financially due to the crisis, compared to 26 per cent across the country.

It also showed that 30 per cent of women are struggling, compared to 25 per cent of men.

“A higher proportion of adults in certain groups were struggling financially in January 2024. These included adults from low-income households; unemployed adults and others not in work – such as the long-term sick and full-time carers; renters; single adults with financially dependent children; and those living in the north of England and in the most deprived areas of the UK,” the survey, conducted between December 8, 2023 and January 28, 2024, revealed.

“These groups were also more likely to be struggling financially with the increased cost of living.”

Families with an income of under £15,000 a year are struggling the most (60 per cent), according to the research, followed by the unemployed, single adults (55 per cent) and renters (50 per cent).

The survey also said more than 5.5 million people had fallen behind or missed paying one or more domestic bills or credit commitments in the previous six months from January 2024. This was down from 6.6 million people a year earlier.

“In the 12 months to January 2024, 2.7 million adults sought help from a lender, a debt adviser or other financial support charity because they found themselves in financial difficulty,” according to the FCA’s findings.

“Nearly half (47 per cent) of those that sought help said they were in a better position as a result. However, two in five adults who had fallen behind on their bills said they had avoided talking to their lender about their finances.”

The FCA survey also found that people are spending less and saving or investing less to make ends meet. However, very few have stopped contributing to or reduced their pension contributions.

“In the 12 months to January 2024, 40.5 million of adults (77 per cent) spent less or worked more to make ends meet – although fewer reported this than did so for the six months to January 2023 (89 per cent). Also, 44 per cent stopped or reduced saving or investing to make ends meet, while 23 per cent used their savings or investments to cover day-to-day expenses. In total, 53 per cent did either of these things in the 12 months, compared to 56 per cent a year ago,” it said.

Given the rising costs of utilities, 27.5 million people cut back on the amount of electricity, gas or other heating fuel used to save money in the latest survey, compared to 37.7 million people in January 2023. The number of people who had cut back on their food shopping to save money also reduced during the survey period.

Another aspect of the survey examined the impact of the cost-of-living crisis on people’s mental wellbeing.

According to the latest survey, around half of adults (49 per cent) reported one or more experiences of mental struggles, compared to 59 per cent of adults in January 2023. The most commonly reported issues were feeling more anxious or stressed.

In the wake of the survey, the financial watchdog has urged borrowers to contact their lender for support if they are worried about keeping up with payments. People can also visit MoneyHelper for tips on living on a squeezed income and to find free, expert debt advice.

Sheldon Mills, executive director of consumers and competition said: “Our research shows many people are still struggling with their bills, though it is encouraging to see some benefitting from the help that’s available.

“If you’re worried about keeping up with payments, reach out to your lender straight away. They have a range of support options and will work with you to agree the best one for you. You can also find free debt advice through MoneyHelper.”

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