Over a quarter of UK adults were found to have “low financial resilience” due to the effects of the COVID-19 pandemic, according to a study by the Financial Conduct Authority (FCA).
According to the regulator’s Financial Lives Survey (FLS) conducted in October 2020, there are now 27.7 million adults in the UK with characteristics of vulnerability such as poor health, low financial resilience or recent negative life events. This is up 15% from the survey in February 2020, right before the pandemic exploded worldwide.
Among these vulnerable adults, 14.2 million had low financial resilience – which was defined as over-indebtedness or with low levels of savings, or low or erratic earnings. This was up from 10.7 million in the previous survey.
Furthermore, in October, one in three (30% or 15.9 million) adults said they expected their household income to fall during the next six months, while 25% (13.2 million) expected to struggle to make ends meet, the FCA said.
To cope with the financial hardships, a third (33% or 17.5 million) of adults reported that they were likely to cut back on essentials or to use a food bank (11% or 5.6 million); while 8.1 million (16%) expected to take on more debt. On the other hand, 48% of adults said their finances had not been affected negatively by COVID-19, with 14% having seen an improvement in their financial situations.
“While there are some positives in the data, many of the findings are worrying,” said Nisha Arora, FCA’s director of consumer and retail policy. “Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown. The pain is not being shared equally with a higher than average proportion of younger and BAME adults becoming vulnerable since March. It is likely the picture will have got worse since we conducted the survey.
“Vulnerability remains a key focus for the FCA, and has been brought into sharp relief by the pandemic. We continue to work with the wider financial services sector, including businesses, regulators and government to support and protect consumers. We expect to finalise our guidance on how firms should treat vulnerable customers shortly.”