New Consumer Duty: firms are required to have an implementation plan in place by October 2022
When the ongoing rapid rises in the cost of food, transportation and energy first began early
When the ongoing rapid rises in the cost of food, transportation and energy first began early this year, many commentators were quick to warn we’d see an eventual avalanche of individuals struggling with their finances. And six months on, the most recent data suggests that – for an increasing cross-section of UK customers – the squeeze may have finally reached the breaking point.
A new study by consumer organisation Which? has revealed that approximately 2.1 million households reported missing or defaulting on at least one mortgage, rent loan, credit card or bill payment in June. The Office for National Statistics (ONS) also noted that an alarming 88% of UK households experienced a rise in their cost of living during the same month.
It’s no surprise, then, that consumer confidence is now at its lowest point since early 2020 – a time when the government had just shut down huge swathes of the economy entirely as the pandemic hit British shores. Consumers are becoming more fearful that a recession is around the corner – and with inflation continuing to spiral and fuel costs steadily creeping up, they’d be forgiven for assuming there’s little relief on the horizon.
So, just how concerned should we be about public morale?
The cost-of-living crisis: what do consumers think?
According to Which? research, more than three-quarters (78%) of British consumers are convinced the UK’s economic climate is set to deteriorate further over the coming year, with the number optimistic of a recovery dwindling to just 8%. This amounts to a net confidence rating of -70 for June, a stark decline from the -47 recorded one month prior.
But beyond the big picture, perhaps of even greater concern is the downward trend in the public’s perception of their individual financial security the longer the cost-of-living crisis continues. The latest polling found that confidence in future household finances dipped a full 12 points from May to June alone, dropping from -28 to -40.
In fact, a recent study by the Abrdn Financial Fairness Trust and Bristol University estimates that as many as 4.4 million households across the country – around one in every six – could now be facing ‘serious financial difficulties’ as a direct result of the price rises.
The real-world consequences of inflation
In June, a majority of all consumers polled (58%) reported having to adjust their financial decisions due to the increase in prices, including cutting back on essential purchases or breaking into their savings to afford payments. This figure is comparable to the previous two months but represents a significant raise from 40% just one year ago – highlighting how severely the situation has escalated since the new year.
These findings also corroborate with a survey conducted by BBC in May, which indicate that as many as 56% of households are buying fewer groceries and going without basic necessities as the purchasing power of their hard-earned cash weakens on a seemingly weekly basis.