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Almost 4.5 million UK households under 'serious financial difficulties'

·Finance Reporter, Yahoo Finance UK
·3-min read
financial difficulties NORTHWICH, ENGLAND - JULY 06: In this photo illustration a small selection of essential items sits in a shopping trolley on July 06, 2022 in Northwich, England. The British Retail Consortium recently said food manufacturers and supermarkets are having to pass on some of the cost of soaring raw materials to consumers, leading to the price of basic goods throughout the UK rising at the fastest pace since September 2008. Fresh food prices increased by 6% in the year to June 2022 coupled with an increase in inflation, and fuel and energy prices to create a cost of living crisis.  This is leading to millions of low-income households going without essentials items, falling behind on bills and taking on debt. (Photo by Christopher Furlong/Getty Images)
Most UK households have reduced the quality of food they eat in an attempt to cut costs in the face of 'serious financial difficulties'. Photo: Getty

One in every six UK households face serious financial difficulties and are cutting back on their spending by buying lower-quality food and cutting back on showers to make ends meet.

The Abrdn Financial Fairness Trust and researchers at the University of Bristol estimated that 16% of households, or 4.4 million, are in “serious financial difficulties” and a further 20% are “struggling” to get by.

The figures mean that more people now are struggling with their costs than at any point during the pandemic as inflation eats into disposable income.

Soaring inflation is hitting lower and middle-income families the hardest.

Inflation in the UK is at record high levels
Inflation in the UK is at record high levels. Chart: Yahoo

Most respondents are trying to tackle rising energy bills. Some are reducing the number of showers and baths they take and others are using the oven less.

Three fifths of respondents said they had avoided turning on the heating while a quarter (24%) said they heated only part of their home in efforts to cut costs.

Some 71% said they have reduced the quality of food they eat, over a third (36%) have sold or pawned possessions and 27% have cancelled or not renewed insurance policies.

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“Times are tough for everyone, but it’s those on the lowest incomes who are particularly feeling the effects of rising prices,” said Mubin Haq, chief executive officer of the trust.

“Wages have largely stagnated and are no longer keeping pace with inflation; and social security is lower in real terms than it was over a decade ago.

Households earning more than £100,000 a year were the only group who did not report an increase in serious hardship.

Analysts predicted the energy price cap is on track to rise to £3,244 a year in October, when it is next adjusted, up from £1,971 a year.

Energy bills are set to soar
Energy bills are set to soar. Chart: Yahoo

More than a fifth of casual workers had stopped or reduced pension contributions. Single parents, social renters and households with children are being hit hardest.

“It’s particularly worrying that people are potentially storing up future financial problems for themselves,” said Sharon Collard, a professor at the University of Bristol.

There are also regional disparities as households in Wales, Scotland, and the north east of England reported higher levels of serious financial difficulty than the UK average.

Experts warned that government support measures — like the £150 council tax rebate announced in March — may not be reaching those who need it the most.

Read more: Half a million Scots risk struggling to access cash amid bank closures

The survey found a similar proportion of households in serious financial difficulties reported receiving the rebate as those feeling financially secure, at 40% compared to 41%.

Rocio Concha, Which? director of policy and advocacy, said: "The soaring cost of living is forcing many consumers to take increasingly drastic actions just to make ends meet.

"These figures reflect recent Which? research that found consumer confidence is at its lowest point since the start of the pandemic, with six in 10 telling us their household had to make an adjustment — such as cutting back on essentials or dipping into savings — to cover essential spending in the last month.

"The government and businesses must ensure that targeted support reaches the ever-growing number of consumers struggling to make ends meet.”

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