Cost of Living Crisis Leaves 3 in 4 UK Adults in Worse Off Financial Situation, according to new research

HOUSEHOLDS in the UK are in a worse financial position as a result of the cost of living crisis than they were during the Pandemic, according to Plend's latest Financial Inclusion Report.

The 'Financial Inclusion Report - the impact of a cost of living credit crunch' focuses on the impact of the cost of living crisis, personal and household finances, and the resultant impacts on access to financial services in the UK. The findings emphasise how badly some groups; such as:- young people and ethnic minorities; have been affected more by the crisis than by the Pandemic, thereby contributing to the increase in financial exclusion of those looking for support.
Ethnicity and poverty factors

The report highlights notable ethnic disparities, with 58% of people from Black and minority ethnic communities borrowing money because of the financial impacts of the cost of living crisis, that is nearly double the proportion of white people doing the same (30%).

There are also a number of examples within the findings that highlight how the cost of living crisis has exacerbated the 'poverty premium,' the extra costs put on those on low incomes who have to pay for essential products and services. Ethnic minority groups are less likely to be accepted for loans, with 54% of those who applied rejected in the last 24 months, and those who were accepted faced higher-than-average APR rates. This is in comparison to 38% of white people who were rejected from loans in the last 24 months.

Percentage of people who agree or disagree that they feel locked out of the financial system:-

Regional disparities...

The cost of living crisis has had a differential impact on Regions within the UK. People in the North West have been most heavily affected, with more 78% of people saying they are in a worse financial position now than at the start of the crisis, followed closely by 78% of those in Wales.

This financial vulnerability is in turn affecting people's well being, with 58% of Londoners saying their mental or physical health has been impacted.

Lack of access to credit is high, with Scotland having the highest loan rejection rates of 66% of people, while 25% of Londoners have found it difficult to access financial products.
Young adults and parents

Young people have been disproportionately affected by the cost of living crisis, as 54% of 18 to 34 year olds (54%), the most of any age group, have borrowed money to ease financial pressures, in comparison to 35% who borrowed money to offset the impact of the Pandemic last year. The crisis has also had a detrimental impact on their well being, with 67% claiming that it has affected their mental or physical health, compared to 29% of people aged over 55.

It has additionally been found that 56% of the UK's parents are borrowing money, in comparison to 32% of adults without children.

Ethical and affordable lending... The cost of living crisis has highlighted issues in the access to fair and affordable credit to Britons, as the number of people who feel they are being locked out of the financial system is increasing year on year; thats up from 20% of those surveyed in 2022, to 28% this year (2023).

The report suggests that those who do have access to credit are finding it difficult to pay off debt or balances, with 72% of people having struggled at some point to pay off their loans, up from 50% in the 2022 report, suggesting that financial stability among British consumers is worsening.

22% people feel that they would not be able to access a credit card or loan if they needed money. As a result, 29% of those who were rejected for a loan or line of credit borrowed money from friends or family, and 10% from unregulated lenders.

This year's report also finds that there is a lack of trust between the public and financial institutions, with 21% of credit holding adults believing that loan and credit card companies are charging fair rates. 39% respondents agreed that if they could access a genuinely low interest loan, their financial situation would improve; up from 27% last year.

Cutting back on sustainable living... With the end of Government led strategies and initiatives to incentivise green home improvements, the current financial climate is affecting how households in the UK are dealing with the climate crisis. This includes:- purchasing decisions and the ability to make environmentally sustainable choices as people are delaying home improvements. 57% of the population can no longer afford sustainable products or make environmentally friendly choices.

Additionally, 80% homeowners or mortgage payers have delayed upgrading their homes to be more energy efficient, indicating the detrimental effects that the cost of living crisis is having on the decarbonisation of the residential sector.

Robert Pasco, CEO and Co-founder Plend, comments:- "These findings highlight the mass inequality gaps in our society, exacerbated by the Pandemic and the current cost of living crisis. Those who are already struggling to make ends meet are hit the hardest, with many being forced to turn to high cost credit to meet their basic needs. This only perpetuates a cycle of debt and financial exclusion, trapping people in a vicious cycle they can't escape from, contributing to the:- 'Great Credit Divide.' We must work together to prioritise financial inclusion and create a society where everyone has access to affordable credit, financial stability, and the opportunity to build a better future for themselves and their families."

Richard Lane, Director of External Affairs at StepChange comments:- "Plend's report brings to light how the cost of living crisis has escalated ongoing issues around problem debt and financial exclusion. Struggling borrowers need the Government, regulators and creditors to step up to ensure the mechanisms are in place both to catch people before they fall into long term problem debt and to help people already facing severe financial difficulty. StepChange has supported millions of people seeking support with problem debt and continues to do so, ensuring that those who need help can access it."

Co-founded in 2020 by Robert Pasco (CEO) and James Pursaill (CTO), Plend offers longer term, sustainable loans at fair interest rates for borrowers that are missing out due to traditional credit scoring. Rather than the traditional system of using credit scores based on demographic data to set interest rates, Plend uses open banking to build a fairer picture of individual financial positions, known as the Plend score. Plend created the annual Financial Inclusion Report to help highlight the UK's financial exclusion crisis and those most at risk in society.

This is Plend's second annual Financial Inclusion Report, following last year's which focused on the impact of the coronavirus Pandemic on household and personal finances. The research was conducted by Opinium Research, with a representative sample size of over 4,500 UK adults, and Plend's own customer data. The report also includes:- contributing comments from debt charity StepChange, the Green Finance Institute, Nationwide, the University of Bristol and Fair4All as well as additional reference points from the Centre for Social Justice, Fair By Design, ONS, PFRC, The FCA, The Money Charity, and World Bank.

Author of Plend's Financial Inclusion Report, Alice Tapper. Alice is a financial educator and campaigner. She sits on the steering group of the Living Wage Foundation and is Head of Impact at Plend.

Robert Pasco, CEO and Co-Founder of Plend; also a personal case study. Rob was forced to use high interest credit cards after moving to the UK, despite a successful career in financial services. His debt spiralled and eventually needed to be restructured. He paid back every penny but it ruined his already thin credit score; a blot that still follows him today and has hindered his personal and professional life. Rob still can't get a mortgage but his determination for a fairer future inspired him to start Plend with co-founder Jamie Pursaill.

In this case study Alex, from Norwich, got married at 21 and after having her second child, she stopped working apart from a part-time cleaning job. Her husband oversaw household finances and over the years became increasingly controlling over their financial situation. He insisted she give the small sums she earned to him whilst he would give her a weekly allowance in cash. Unbeknown to her, he funded his secret gambling addiction by taking out large amounts of sub-prime credit. Initially in his own name and later in hers. The relationship culminated in violence. Alex was only able to find safety thanks to her parents. Other women in situations like this are reliant on their ability to access credit; this wasn't an option for Alex whose credit score had been significantly damaged by her financially abusive partner.

In another case study, David, from Northern Ireland, was in Medical School until 4 years ago, studying to become a Doctor. Costs crept up understandably while living away from home, and since he had 40 hours placement weekly and didn't have time to get a part time job, David had to take out an overdraft to support minor expenses. It was arranged that David's family would be able to pay it back after his father's retirement, but this couldn't happen and David was left with an overdraft he struggled to repay, which ultimately resulted in a default and black mark on his credit file. The debt is now fully repaid and David is a registered Doctor, and although it's a dream to apply for a mortgage (that he can afford), he is still facing the repercussions of the mark on his file. For eg:- when attempting to get motor finance last year, David's only options for credit were loans with an APR of 50% and above.

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Joanna Lumley supports young people from Military Families with careers

THE Forces Employment Charity will be marking the Month of the Military Child this April, with a brand new set of resources to help young people of those who Serve and have Served with their next career step.

The charity, which was founded in 1885, originally helped veterans find civilian employment and has since expanded its services to offer support to Military families. This has recently extended to offering employment support to Young people from military families, both serving and veteran within the M3 area, owing to its unique EM3 Armed Forces Veterans and Families Programme.

The team working in the EM3 Armed Forces Veterans and Families come from military families themselves and therefore understand the importance of supporting young people who face an ever changing situation, from frequent moves, education gaps and separation from parents' and social networks.

Through extra support in education, training and expanding the pool of employment choices and a caseworker, the programmes supports young people to plan a clearer future.

The charity also works with many young people from across the UK through its long-standing programme, Future Horizons. This programme helps early Service Leavers with the next stage of their civilian career, which often includes younger veterans aged between:- 16 to 25.

Resources created for the Month of the Military Child will be specifically tailored to help those with little to no work experience of the civilian world, including a starter 101 series, which will cover all the basics job seekers may need to get started, such as:-

• How to write a CV.
   

• How and where to look for jobs.
   

• How to write a cover letter.
   

• How to manage your 1st interview.

The charity is also planning a social media takeover, which will include:- insights from people who grew up in Military families, speaking about their experiences, how they have shaped their careers, plus any advice they have to offer others from a similar background.

Joanne McLeod, EM3 Armed Forces and Families Programme Manager at Forces Employment Charity, says:- "As a Military spouse, I understand the unique challenges that affect Forces families. From frequent house moves, to needing to fit in and make friends quickly, there can be a lot to manage. This can be particularly challenging for service children, who are moving Schools, skipping parts of the curriculum and leaving behind their social networks. However, living in such unique circumstances also equips the Military community with an incredible skill set that can set them apart from other job seekers."

Dame Joanna Lumley is supporting the initiative. Speaking about the impact being a Military child has had on her own career, she says:- "Like many Military children, I went away to boarding School at a very young age. It meant I had to be able to find my feet pretty quickly and find ways to be able to relate to lots of different types of people. I never realised at the time how much those experiences would come to help me in my career!"

Joanne McLeod adds:- "Our role at the Forces Employment Charity is to help people recognise those skills and find the best possible way to present themselves to employers, to maximise their chances of success. This is especially important for those just starting out, such as Military young people and/ or Early Service Leavers. I am delighted that we are able to offer a new and specialist set of resources to support this group in celebration of the Month of the Military Child."

The Forces Employment Charity provides:- life long, life changing support, job opportunities, and training to Service leavers, veterans, reservists and their families, regardless of circumstances, rank, length of service, or reason for leaving.

Its team of dedicated Advisors can help job seekers develop their employability to present candidates to employers in the best possible way. That can involve advice on what to apply for, how to find work and how to develop:- a good CV, your interview skills, gain training, and more...

For more information visit:- ForcesEmployment.Org.UK.