One in six households face serious financial difficulties and are cutting back on their spending and energy use, adding 1.6 million people to the total of those suffering from the crisis in the cost of living, according to research.
A financial tracker has found that more people are struggling with their costs than at any point during the pandemic as inflation eats into disposable income and with energy bills set to climb above £2,800 later in the year.
Britons are facing a 2 per cent drop in real disposable income this year, the worst since the 1950s, despite government help with energy and council tax bills.
In a tracker commissioned by abdrn, the investment house, in partnership with the University of Bristol, half of all the 6,000 households surveyed said that their finances were in a worse state than when the pandemic had struck. The figure was at a third in October 2021, and means that approximately 4.4 million people are in financial hardship.
Rising inflation will disproportionately hit low-income families who spend more of their budget on essentials such as food, rent and energy. The most vulnerable parts of the population were said to be single mothers, renting households and families with more than two children, according to the tracker, which has been running since March 2020. Disabled people and those on benefits also reported the most hardship. People in Wales, Scotland and the northeast of England suffered the most.
Household energy costs are due to surge in October after Ofgem, the regulator, raised its price cap to more than £2,800 on the back of record increases in natural gas prices.
Half of households said they were worried they would not be able to pay electricity bills and more than 80 per cent are using less gas and electricity by taking fewer baths and showers, switching the heating off and using the oven less. A fifth of workers in the informal gig economy said they had stopped or reduced their pension contributions.
Sharon Collard, of the University of Bristol, said: “It’s particularly worrying that people are potentially storing up future financial problems for themselves, cancelling insurance or reducing their pension contributions.”
Millions of Brits cut back on their spending