More and more UK residents are living payday to payday

Many consumers have little to no ‘buffer’ to draw on if they are hit with an unexpected cost during the month. More than half (53 per cent) say they have one month’s income or less that they can access at short notice, while a quarter (24 per cent) have no savings at all.

Year on year, we see a clear rise in respondents who have less than one month’s savings or nothing at all put aside to cover unexpected costs. Four in ten (41 per cent) are in this position, which is up from 19 per cent in 2022 and 15 per cent in 2021. Faced with car repairs or veterinary bills, for example, they would have to look at taking out additional credit – likely at a high rate of interest.

Things have been tough for consumers and we are seeing people who have never been in financial difficulty before struggling because of rising interest rates and costs. There is only so much people can do to cut back on their day-to-day expenses and many have used up their savings meeting their commitments.

While 75 per cent are seeking to cut daily expenses and 39 per cent plan to use up savings to pay day-to-day expenses and bills, these are only temporary solutions. Eventually, when their money runs out, consumers will be forced to stop paying bills. Among the 26 per cent who overspend just to meet essential commitments, the average amount that they exceed their budgets by is £191 – 17 per cent of the average monthly income.

Employee remuneration packages may be much higher than they were for several years after the global financial crisis, but they are not keeping pace with inflation. As consumer real earnings stagnate or even decline, a large portion of consumers will have to make difficult choices about how to navigate the months ahead: 57 per cent are likely to cancel spending on holidays; 63 per cent say they are likely to spend less at Christmas. Meanwhile 91 per cent of businesses who were surveyed during for Intrum’s annual European Payment Report say their employees have already asked for a higher-than normal pay rise or they expect them to ask for one soon, with 64% admitting they are concerned about their ability to meet employee demands for higher wages.