• 42% of British households (11 million in total) are in financial wealth poverty, according to data released by the ONS today covering the period April 2018 to March 2020
• 35% of households are spending more than they have in disposable income
• Financial buffers are lowest in the North East, where average total wealth of £168,500 is about a third of the level of £503,400 in the South East
• People living alone, single parent families, and households in the North East are most vulnerable to financial shocks
Laith Khalaf, head of investment analysis, AJ Bell:
“These latest figures from the ONS are deeply concerning. They show that many people in the UK don’t have enough income to cover their expenditure and lack the financial resources to deal with any emergencies. They also reveal the households who are most at risk from the rising cost of living, because they are spending more than their income and have little in the way of savings, including those who live alone, single parent families, and households in the North East. The data was collected before the pandemic and the inflationary pressures that are now hitting households, so the wealth inequalities on show have likely only been exacerbated.
“11 million households are in wealth poverty, which means that if they lost all their income, they don’t have enough liquid assets to sustain a basic level of expenditure for three months. This is less of an issue when the labour market is as strong as it is right now, but if the Ukraine crisis and the consequent rise in energy costs prompts a global recession, unemployment could rise, and many people would be cut adrift without a financial lifeboat. Seeing as over a third of households are spending more than they’re earning, a large proportion of people simply don’t have the resources to build up a rainy day fund, even if they wanted to.
“There are no easy answers to the financial frailty of such a large number of UK households, particularly in the current environment when the rising cost of basic items like food and energy are going to heap pressure on household budgets, not to mention the tax rises that are arriving in April. Those who can afford to put aside some money each month should do so, in order to build up a financial buffer against future shocks. Those who are struggling to make ends meet do have some resources available to them to at least get a handle on the problem, like the MoneyHelper service from the government’s Money and Pension Service and debt advice charities like StepChange.”
