The Financial Conduct Authority (FCA) has estimated that 27.7m Britons were financially vulnerable by October 2020 – a 15 per cent increase since February 2020.
The regulator’s latest Financial Lives survey also found that the number of consumers with low financial resilience has grown since the start of the Covid-19 pandemic – from 10.7 million in February 2020, to 14.2 million by October 2020.
Members of the black, Asian and minority ethnic (BAME) communities were more likely to have become financially insecure between March and October of last year.
“Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown,” said Nisha Arora, director of consumer and retail policy at the FCA.
“The pain is not being shared equally with a higher than average proportion of younger and BAME adults becoming vulnerable since March. It is likely the picture will have got worse since we conducted the survey.
“Vulnerability remains a key focus for the FCA, and has been brought into sharp relief by the pandemic. We continue to work with the wider financial services sector, including businesses, regulators and government to support and protect consumers.
“We expect to finalise our guidance on how firms should treat vulnerable customers shortly.”
According to the survey, by last October one in three (30 per cent) of adults said they expect their household income to fall during the next six months, while 25 per cent (13.2m) expected to struggle to make ends meet.
As a result, 33 per cent (17.5 million) said that they would likely have to cut back on essentials, while 11 per cent (5.6 million) said that they may have to use a food bank, and 16 per cent (8.1 million) said that they expected to take on more debt.
48 per cent of UK adults told the FCA that they have not been affected financially by Covid-19, while 14 per cent said that they have actually seen an improvement in their financial situation.
Mark Turner, managing director, compliance and regulatory consulting practice, Duff & Phelps, said that the survey results are a stark reminder from of the impact that Covid is having on millions of people across the UK.
“The onus must be on financial services firms to think carefully about whether their checks and balances are effective in this stressed environment,” said Turner.
“With two in five people reportedly struggling, it’s likely that there are customers who are heavily affected and being driven by their circumstances to provide optimistic or even false data to make ends meet.
“Customers using these methods could be digging themselves into a deeper hole by accessing products which are no longer suitable for their means.”
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