The Financial Conduct Authority’s latest Financial Lives survey shows that 53% of UK adults are now potentially vulnerable. It reveals that 27.7 million adults in the UK demonstrate characteristics of vulnerability such as poor health, low financial resilience or recent negative life events.
The latest survey was carried out in October 2020, and the 27.7 million figure represents a 15% increase from the 24 million figure in the previous survey, which took place in February 2020. 24 million represents 46% of UK adults, so it is reasonable to conclude that it is the coronavirus pandemic that has tipped the balance and created a situation where UK adults are now more likely than not to be potentially vulnerable.
The number of adults with low financial resilience – which could mean they are over-indebted, have low levels of savings or low or erratic earnings – has risen by one-third between the two surveys, from 10.7 million to 14.2 million. This means that 27% of adults now report low financial resilience.
There has been an even more significant increase in the number of people who have experienced a negative life event, which has risen by 45% from 10.5 million to 15.3 million. This new higher figure represents 29% of the adult population, and redundancy and reduced working hours are said to be some of the most common negative events people have experienced during the eight-month period between the two surveys. 27% of employees who responded to the survey reported being furloughed during this period and 17% said that their working hours were reduced. 71% of the self-employed said their revenues reduced and 9% were forced to stop trading altogether.
15.9 million adults (30% of the total) say they expect their income to fall during the next six months, so the number of vulnerable individuals in the population could yet increase further.
17.5 million (33%) say they expect to cut back on essential spending to cope with their financial difficulties, 8.1 million (16%) are planning to take on additional debt and 5.6 million (11%) are proposing to use a food bank.
However, as evidence of the divisive effects the pandemic is having, the survey also shows that 48% of respondents report no change in their financial situation, with 14% saying their financial situation has improved. Of the remaining 38% who say their situation has deteriorated, 23% say it has got ‘a little worse’ and 15% ‘a lot worse’.
18% of respondents now report a mental health issue, compared to just 12% in February’s survey. 43% of those reporting a problem of this nature are in the 18-34 age group.
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.
“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.”