One in four have ‘low financial resilience’
The regulator defines low financial resilience as over-indebtedness or with low levels of savings or low or erratic earnings.
It found that younger people and BAME adults have been hit particularly hard by the pandemic.
In October one in three (30% or 15.9m) adults said they expect their household income to fall during the next six months, while 25% (13.2m) expected to struggle to make ends meet.
To cope with the hardships they expected to face, many adults reported that they were likely to cut back on essentials (33% or 17.5m) or to use a food bank (11% or 5.6m). About 8.1 million (16%) expected to take on more debt.
However, 48% of adults have not been affected financially by Covid-19, and 14% have actually seen an improvement in their financial situation.
Over the course of the pandemic, the FCA has worked with the financial sector and consumer bodies to help protect consumers with measures such as mortgage and credit payment deferrals.
The report reveals the impact these measures have had with one in six (17% or 3.2m) mortgage holders having taken up a mortgage payment deferral and four in 10 (40%) of them reporting they would have struggled a lot without such measures.
Nisha Arora, director of consumer and retail policy at the FCA, said: “While there are some positives in the data, many of the findings are worrying. Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown. 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.”
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “One of the cruellest financial aspects of the pandemic is the way it has devastated some people’s incomes while leaving others better off. This survey shows country has been split roughly in half, with young people and BAME adults bearing the brunt. Separate research from the ONS also shows it has taken a particular toll on renters, women and the squeezed middle.
“If your resilience has been entirely exhausted by the crisis, it’s vital to keep going. It’s tempting to try to borrow through the worst of it, but this just builds up more problems further down the line. You don’t have to manage on your own. There’s support available from charities like Stepchange and Citizens Advice, who can help with everything from getting more help from the government to finding it in the local community.”