Britain’s household debt levels are at their highest since the 1980s with consumers now owing £1.5 trillion, according to a report published today by Which?
And the situation is so bad, Britons are now amongst the most economically vulnerable in Europe, with just 53 percent of saying they are ‘satisfied with life’, the report reveals.
Which? executive director, Richard Lloyd, said: “Consumers in Britain are going through the tightest squeeze in their living standards since the 1920s. Many consumers are clinging to the edge of a financial cliff with savings at rock bottom and personal debt levels sky high.”
Overall, it was found that women and young people aged between 18 and 29 are suffering from the highest levels of debt. As a result, they have also felt the largest impact to their living standards. The report found that for every pound earned in this group, 47p was owed, compared to a national average of 21p.
One in 10 young people also said they had defaulted on a bill, while 45 percent said they ran out of money every month (compared to 38 percent of consumers on average). In response, Which? and other consumer groups are calling for compulsory personal finance education in schools to help young people learn how to manage their money earlier.
Half of British consumers (48 percent) said they could not cope with any further unexpected costs, with 35 percent already struggling on their current incomes. However, people earning the second lowest wage bracket (£12,376 – £21,424 peryear) have seen the biggest decline in quality of life; from 69 percent reporting that they are ‘living comfortably’ in 2003 to 48 percent in 2010.
Consumers who sit in the lowest income bracket earning £12,376 a year of less, were found to have the highest debt ratio, owing 37p for every £1 they earned. Together with the group in the wage bracket above, the two groups form a larger group of working poor – the squeezed bottom.
Mr Lloyd said: “Shocking numbers of people say they are forced to take on new forms of debt just to make ends meet, and many more would not cope with unexpected shocks to their incomes or household bills.”
As a result of financial difficulties, consumers are looking harder at their budgets and where they can save. 43 percent of people said they would try to cut back on food costs, while more than 50 percent will cut back on holidays and socialising.
Mr Lloyd warned: “The consumer has too often been an afterthought in the government’s growth agenda. With this new report, we show just how well those with power, both in government and business, are doing at putting consumer wellbeing first.”