One in five (21%) adults in the South East would find it somewhat difficult, very difficult or impossible to immediately pay an unexpected bill for an amount as little as £20, without assistance from an external source, according to new research from R3, the insolvency trade body, and ComRes.
One in ten (9%) South East adults said they would find it ‘very difficult’ or ‘impossible’ to immediately pay an unexpected £20 bill without assistance from an external source, while 13% said that doing so would be ‘somewhat difficult’.
R3’s research asked adults in the South East how difficult they would find it to immediately pay unexpected bills for other amounts too. A third (33%) said they would find it at least somewhat difficult to pay an unexpected £50 bill, 49% said the same about a £100 bill, 64% said the same about a £250 bill, while 70% said this would be the case for a £500 bill. More than half (55%) of South East adults would find it very difficult or impossible to immediately pay an unexpected £500 bill without assistance from an external source.
The research highlights the lack of financial resilience among South East adults, and demonstrates the toll taken by years of non-existent real wage growth on levels of savings.
Mike Pavitt, chairman of R3's Southern Committee and partner and head of the corporate restructuring and insolvency group at Paris Smith in Southampton, said: “The research is more evidence of financial precariousness in the region, and a worrying sign that many people do not have any kind of financial cushion to fall back on if needed.
“Many people are one unexpected bill away from losing financial stability. A missed payment for a relatively small amount can be the trigger for an escalation in debt that soon becomes impossible to juggle.”
Mike Pavitt continues: “Unexpected bills for these amounts aren’t uncommon: £20 for a school uniform, £50 for a train ticket to visit a sick relative, £100 for a new washing machine motor, £250 for car servicing or repair, or £500 for a boiler repair or replacement.
“When bills like these become too much, people in debt might discover another unexpected and unaffordable bill: it costs £680 in government fees to enter bankruptcy. This kind of artificial barrier to an insolvency procedure makes it harder for people to resolve their debts and rehabilitate themselves financially. The Government must look at how to make bankruptcy more accessible.”
The Government has announced some steps to support those in financial trouble, including a new ‘breathing space’ procedure, and a ‘Help to Save’ scheme.
Mike Pavitt adds: “R3 has long advocated for a breathing space period, free from creditor action, during which people in debt will have the opportunity to speak to a regulated adviser about their options. At the moment, we are concerned that people in financial distress do not have access to pressure-free advice, which makes it harder for people to find the most appropriate solution for their situation.
“Help to Save is a potentially useful tool as well. The ONS says that, in 2017, UK households spent £900 more than they received in income, so alarm bells should be ringing at the highest levels about financial vulnerability to external shocks.”
Housing, age and gender
Looking at the research more closely for Britain as a whole, some clear differences emerge among certain demographics.
Home ownership appears to be a key factor: half (51%) of renters would find it very difficult or impossible to pay immediately an unexpected bill of £100 without assistance from an external source, over three times the proportion of homeowners (16%) who said the same thing.
Women (32%) were significantly more likely than men (23%) to say it would be very difficult or impossible for them to immediately pay an unexpected bill of £100 without external assistance. This was also the case when asked about bills for any other amounts tested: £20 (7% women vs. 4% men); £50 (19% vs. 13%); £250 (47% vs. 36%), and £500 (60% vs. 45%).
Those aged 35-54 were most likely to say they would struggle to immediately pay an unexpected bill for £100 without external assistance, with nearly two in five (38%) saying it would be very difficult or impossible for them, followed by those aged 18-34 (33%). In comparison, just 15% of British adults aged 55+ said the same.
Mike Pavitt commented: “The differences between homeowners and renters, men and women, and those in varied age brackets show that the picture is far from homogenous. Sadly but unsurprisingly, people in more financially insecure situations are the most at risk of having their situations deteriorate due to a single unexpected bill.
“Although it has slowed recently, the rate of growth of consumer credit has continued to rise, and the consumer debt burden is approaching levels last seen just before the global financial crisis. Borrowers who are just skating by may be caught out by future interest rate rises, making the cost of servicing their debt just that little bit too high – our research shows that a small but significant number of people would be hard-pressed to find even an extra £20.
“The festive season brings strong temptations to spend money, the picture for many consumers is far from rosy. With consumer spending underpinning much of the UK’s economy, and with consumer confidence strongly linked to levels of disposable income, the economic impact of low levels of savings and people’s vulnerability to financial shocks could be severe.”