More than half the UK’s adult population are displaying characteristics of vulnerability as Covid-19 takes a heavy toll, according to official data laying bare the pandemic’s impact on households’ financial security.
The Financial Conduct Authority’s Financial Lives survey found that 27.7m UK adults were showing characteristics of vulnerability including poor health, low financial resilience or recent negative life events in October, up 15 per cent since March.
The regulator’s report is published in February each year as a marker of the state of the nation’s finances. The FCA surveyed 16,000 people in February 2020 but spoke to an additional 22,000 in October 2020 to map the fallout from Covid-19.
It found a stark decline in financial wellbeing over that period, with 11 per cent of respondents saying they were now likely to use a food bank and 16 per cent expecting to take on more debt in the next six months.
Nisha Arora, director of consumer and retail policy at the FCA said: “The pain is not being shared equally with a higher than average proportion of younger and Bame [black, Asian and minority ethnic] adults becoming vulnerable since March. It is likely the picture will have got worse since we conducted the survey.”
The FCA survey found working-age adults had been disproportionately hit by the virus, with the largest proportional increases in vulnerability between February and October — 40 per cent — experienced among younger adults and the self-employed.
The results follow a significant rise in people losing their jobs, being forced to take pay cuts or accept reduced hours because of the pandemic. Some 27 per cent of the FCA’s survey respondents in October were furloughed and one in six said their hours were cut.
The number of people with low financial resilience due to over-indebtedness or low levels of savings among other factors, grew from 10.7m to 14.2m over the course of 2020, according to the FCA.
Tom Selby, senior analyst at investment platform AJ Bell said: “These latest FCA figures lay bare the profound and harrowing impact coronavirus has had on people living, working and saving in the UK.”
The FCA’s findings are a reversal of the trend before Covid-19, when the proportion of vulnerable consumers in the UK was falling. In February 2017, 51 per cent of UK adults showed one or more characteristics of vulnerability, dropping to 46 per cent in February 2020. The number of adults with low financial resilience had also been falling — reaching 10.7m in February 2020, down from 11.6m in 2017.
But both those numbers had soared above their 2017 highs by October, underlining the damage wreaked on progress to financial wellbeing as a result of Covid-19.