Financial vulnerability surges during 2020 as COVID-19 hits Brits hard

Over half the UK adult population – 27.7 million people – show characteristics of vulnerability including poor health, low financial resilience or recent negative life events, new FCA research reveals.

This represents a 15% rise since February, when 24 million people displayed characteristics of vulnerability.

COVID-19 has had a severe impact on financial resilience of Brits, with over a quarter of adults (14.2 million) labelled as having ‘low financial resilience’.

Over the course of 2020, the number of people with low financial resilience increased by a third (3.5 million). In October around one-in-three (15.9 million) said they expect their household income to drop in the next six months, while 25% (13.2 million) expected to struggle to make ends meet.

A staggering 5.6 million people said they were likely to use a food bank, while 17.9 million said they could cut back on essentials.

Worryingly, 8.1 million people expect to take on more debt as a result of the pandemic – although 14% of UK adults have seen an improvement in their financial situation.

Tom Selby, senior analyst at AJ Bell, comments: “These latest FCA figures lay bare the profound and harrowing impact Coronavirus has had on people living, working and saving in the UK.

“Over half the UK adult population – a staggering 27.7 million people – are now demonstrating characteristics of vulnerability, while over 14 million have low levels of financial resilience. Both numbers have surged during 2020.

“This is unsurprising given the health, lifestyle and financial impact the pandemic has had on people’s lives, but nonetheless remains seriously worrying. The fact over 5 million people expect to turn to a food bank at some point is perhaps the most striking demonstration of the desperate situation many people are facing.

“It is also concerning that 8.1 million people anticipate taking on more debt to make ends meet, potentially pushing financial problems down the road and piling on debt interest payments in the process.

“Before taking on debt make sure you have looked at cutting other costs first and, if this isn’t possible, have a plan in place to pay the debt off. For many this will feel impossible but borrowing on the never-never will only accentuate the financial pain in the future.”