The 2.3 million missed payments continue the peak January trend seen in past years, and sit above December’s 1.9 million defaults, according to campaign group Which?’s consumer insight tracker.

Six in 10 households – or an estimated 16.5 million – said they have cut back on essentials, dipped into savings or resorted to selling items to cover their spending last month.

This is up from the four in 10 seen this time last year. However, it is lower than the peak (65%) reported in September.

Which? said the increase in the proportion adjusting their spending is largely driven by more households cutting back on essentials, such as utility bills, housing costs, groceries, school supplies and medicine.

Further, the number of households cutting back on essentials has increased 11 percentage points from three in 10 (27%) last January to four in 10 (38%) this January.

Inflation gap on the rise

When Which? dived into data from the Office for National Statistics (ONS), it found those on the lowest incomes experienced much steeper increases in inflation – peaking at an estimated 11.5% in October 2022.

This was nearly 3% higher than the estimated inflation rate for the highest income group (8.6%). This is the largest inflation gap Which? has estimated between income groups since its lived inflation estimates began in 2016.

Meanwhile single parent and retired households have experienced a particularly high lived inflation rate compared to other family types because they spend a greater proportion of their budget on food, energy and fuel, which have all been hiked during the cost-of-living crisis.

With the UK heading into recession, rising mortgage and rent costs, and the Energy Price Guarantee becoming less generous from April, Brits will likely face further financial pressures in 2023.

Worry and stress

A 46-year-old man from Northern Ireland told Which?: “I find it hard to sleep. I am eating less due to money and worry. My mortgage has risen significantly. I am finding it hard to find money for energy bills. As I live in a rural area I can no longer afford to try to socialise with friends and family due the cost of fuel. I am feeling more isolated than ever.”

Rocio Concha, Which? director of policy and advocacy, said: “With 2.3 million UK households missing payments in January and those on the lowest incomes being hit hardest, consumers will need more support than ever in 2023.

“As the cost-of-living crisis continues to bite into household finances, we are calling on businesses in essential sectors – like food, energy and broadband providers – to do more to help customers get a good deal and avoid unnecessary or unfair costs and charges.”

As part of the campaign, it wants to see telecoms firms allow consumers to leave without penalty if their prices are hiked mid-contract.