Overview

Compared with our previous Tracker in October 2022, we identify modest improvements in the financial wellbeing of UK households – with a decrease in the proportion of households ‘in serious difficulties’ from 17% to 14%, with more households instead in the ‘struggling’ (from 21% to 22%) and ‘exposed’ (from 34% to 37%) categories. Fewer households than ever are in our ‘secure’ category (decreasing from 28% to 26%). Overall, financial wellbeing remains significantly worse than in 2020 and 2021.

There has been a 13-percentage point drop in households who report that thinking about their financial situation makes them anxious – from 61% in October 2022 to 48% in May 2023. This is similar to levels last seen in October 2021.

But still 23% report that they are currently struggling to pay for food and other essential expenses (up from 22%) – and a growing proportion owe money on at least one bill or credit commitment where they have missed a payment (18%, up from 15%).

Half of households (49%) feel that the past six months have been negative for their finances, compared to just 26% during the pandemic.

Cutting back seems to be the ‘new normal’ for many UK households, including in ways that risk long-term health and wellbeing. One-in-five (19%) households are putting off dental treatments due to worries about costs. A third (35%) were not able to afford a healthy balanced diet at least once in the past month. These figures are far higher among households who are ‘in serious difficulties’, with 46% forgoing dental treatments and 82% unable to afford a healthy balanced diet at least once in the past month, as well as regularly missing multiple meals for reasons of cost (25%, compared with 6% of all respondents).

The knock-on impacts of financial stress are also evident in the data: one-in-three (33%) people are losing sleep over their finances, with over a third (35%) saying that their financial situation is making their mental health worse.

Looking to the next three months, the proportion of households who are ‘not at all confident’ about their financial situation is higher than at any time in the past three years (11%) – but, at the other end of the spectrum, there has been an increase in the percentage who are ‘very confident’ about the next three months (from 9% in October 2022 to 13%).

Key findings

Fewer households than ever are in our ‘secure’ category (decreasing from 28% to 26%). Overall, financial wellbeing remains significantly worse than in 2020 and 2021. 

There has been a 13-percentage point drop in households who report that thinking about their financial situation makes them anxious – from 61% in October 2022 to 48% in May 2023. This is similar to levels last seen in October 2021.

Cutting back seems to be the ‘new normal’ for many UK households, including in ways that risk long-term health and wellbeing. One-in-five (19%) households are putting off dental treatments due to worries about costs. A third (35%) were not able to afford a healthy balanced diet at least once in the past month. 

Looking to the next three months, the proportion of households who are ‘not at all confident’ about their financial situation is higher than at any time in the past three years (11%) – but, at the other end of the spectrum, there has been an increase in the percentage who are ‘very confident’ about the next three months (from 9% in October 2022 to 13%).

About the research

The period since our last Tracker report in October 2022 has been one of pomp and turbulence for the UK, with the first Royal Coronation in 70 years set against a backdrop of widespread industrial disputes about pay and conditions, with 1 February 2023 the single biggest day of industrial action for more than a decade; and the Bank of England’s Chief Economist coming under fire for suggesting that the UK has to accept that households are becoming poorer.  

As the cost of living crisis continued to impact UK households, the Government committed to provide cost of living payments of between £900 and £1,350 (depending on circumstances) to low income households on benefits, people on disability benefits and pensioners. These are part of a wider package of one-off support measures, including the Energy Bills Support Scheme, which provides all households with £400 toward energy bills, and funding to extend the Household Support Fund, which allows local authorities in England to make discretionary payments to those most in need. By 3rd May 2023 the vast majority (7 million) of eligible low-income households had received the first third of their cost of living payment, with more payments to follow later in the year. There are concerns (as with the 2022 support package) that payments don’t vary by family size – meaning support is less generous for families with children – while some claimants miss out if they weren’t claiming benefits during the eligibility window or if they are subject to benefit sanctions. 

This support package is being rolled out against a backdrop of lower inflation, with an annual inflation rate of 8.7% in April 2023, down from a peak of 11.1% in October 2022. Even so, 93% of adults in Britain reported an increase in living costs in April-May 2023 compared with a year ago, as some prices such as food remain high. At the same time, the Office for Budget Responsibility (the UK’s independent fiscal watchdog) has forecast falls in real post-tax household income in 2022/23 and real household disposable income in 2023, while interest rates have risen to 4.25% in response to inflation, leading to higher borrowing costs for households. 

About the Tracker

abrdn Financial Fairness Trust has commissioned a periodic cross-sectional survey to track the financial situation of UK households since the start of the coronavirus pandemic in early 2020. The latest wave of this survey – conducted in May 2023 – gives insight into the nation’s finances during the ongoing cost of living crisis. The findings are based on responses from 5,766 households about their income, payment of bills, borrowing, debt, savings and ability to pay for other essentials such as food. A team from the Personal Finance Research Centre at the University of Bristol analysed the respondent data collected from YouGov’s panel and produced these findings.