The rapid increase in the cost of living in the UK means that more and more consumers are no longer able to pay their bills. More than two million households have failed to pay at least one regular bill every month since the beginning of the year, according to recent data from consumer organization Which?.
An estimated 2.1 million households defaulted on a mortgage, rent, utility bills, loan interest or credit card bills in June. According to Which? the value has been more than two million every month since the beginning of the year.
For months, the British have been groaning under the ever-increasing cost of living. A variety of developments have reached the island faster than the rest of Europe. The rise in energy prices, for example, had an impact earlier. At 9.1 percent, the price increase is also higher than that of other large industrialized countries.
Improvement is not in sight. “The economic outlook for the UK and internationally has deteriorated significantly,” the Bank of England warned in its semi-annual financial stability analysis on Tuesday. Not only have the prices for everyday goods such as food and energy risen sharply. In addition, as a result of Russia’s war of aggression in Ukraine, the growth forecast has also clouded over.
“These higher prices, weaker growth and tighter financing conditions will make it more difficult for households and companies to repay and refinance debt.” The financial situation of individuals and companies would continue to tighten. Moreover, they would be more vulnerable to further shocks.
The crisis has already hit the budgets of many consumers, said Rocio Concha, at Which? responsible for strategic issues. “The pressure is particularly evident among those who are particularly unprotected financially. Around two-thirds of those earning £21,000 or less say they had to make at least one financial adjustment to pay for essentials in the last month,” she said.
But it has long since affected households that are significantly better off. Among households with incomes over £55,000, 57 per cent have also made significant adjustments. The bottom line is that six out of ten consumers already say that they have now cut back on basic expenses or had to reach into savings. A year ago it was 40 percent.
With interest rates rising, homeowners paying on a mortgage face additional costs. 40 percent of mortgage contracts, which traditionally have shorter terms in the UK than in Germany, expire by the end of 2023 and will have to be renegotiated with a higher interest rate. But longer maturities are becoming more common, with 59.7 percent of mortgage lenders locking in their rates for five years or more in March.
Retail is also preparing consumers for the fact that the situation is far from easing. Sainsbury’s CEO Simon Roberts has warned that inflationary pressures will continue to intensify as the year progresses. Already today, consumers would be watching every penny and pound and adjusting their shopping behavior.
Frequent visits to shops for fewer purchases are a sign that they are increasingly turning to private labels and frozen goods in the chain’s grocery stores. Archie Norman, Chairman of the Board of Directors of Marks, also warned of a “coming winter of consumer demand”.
“Everything on shares” is the daily stock exchange shot from the WELT business editorial team. Every morning from 7 a.m. with our financial journalists. For stock market experts and beginners. Subscribe to the podcast on Spotify, Apple Podcast, Amazon Music and Deezer. Or directly via RSS feed.
