More than a quarter of adults in the UK characteristics of vulnerability such as poor health, low financial resilience or recent negative life events, according to a new survey conducted by the Financial Conduct Authority (FCA).
Its latest Financial Lives survey (FLS), looking at consumers’ financial situations, the financial products they choose and their experiences of engaging with financial services firms, was conducted to understand the impact of the Coronavirus pandemic on the financial situation of consumers.
According to the October survey, there are now 27.7m adults in the UK that are at greater risk of harm. This figure is up 15% since the FCA completed its FLS in February, when 24m displayed characteristics of vulnerability.
Nisha Arora, director of Consumer and Retail Policy at the FCA said: “The Financial Lives survey is fundamental to the work we do as a regulator, enabling us to hear directly from consumers across the UK.
“While there are some positives in the data, many of the findings are worrying. 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.”
Following a poor start to the year, with new car sales down by almost 40%, the Society of Motor Manufacturers and Traders (SMMT) has revised its 2021 new car sales forecast to less than 1.9m vehicles.
The FCA found that the number of consumers with low financial resilience – meaning over-indebtedness or with low levels of savings or low or erratic earnings – has grown. During 2020, the number of UK adults with low financial resilience increased from 10.7m to 14.2m.
Highlighting the threat to people’s incomes from the pandemic, in October one in three (30% or 15.9m) adults said they expect their household income to fall during the next six months, while 25% (13.2m) expected to struggle to make ends meet.
To cope with the hardships they expected to face, many adults reported that they were likely to cut back on essentials (33% or 17.5m) or to use a food bank (11% or 5.6m); 8.1 million (16%) expected to take on more debt.
“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,” Arora added.
Almost half (48%) of adults in the UK say they have not been affected financially by Covid-19, and 14% have actually seen an improvement in their financial situation.
Over the course of the pandemic one in six (17% or 3.2m) mortgage holders have taken up a mortgage payment deferral and four in ten (40%) of said they would have struggled a lot without such measures.
The FCA surveyed more than 16,000 people between August 2019 and February 2020. This was followed by a subsequent survey, with over 22,000 respondents, focused on the impact of the pandemic on consumers, conducted in October.