IHS Markit’s UK household finance index has shown that overall perceptions of financial wellbeing in UK households recorded a score of 37.8 in May, representing a slight increase from the previous month’s eight-and-a-half-year low of 34.9.

While the headline number did rise, it remained among the worst seen since the survey’s inception in 2009 and signalled a further sharp deterioration in the financial health of UK households. There was also a small rise in the Future Household Finance Index, although the figure remained indicative of a strong degree of pessimism towards the outlook for financial health. Workplace activity, income and job security UK households reported a further severe decline in workplace activity during May.

The rate of decrease was unchanged from April’s survey record, with those employed in media, culture or entertainment sectors signalling the sharpest decline in activity. Incomes from employment fell drastically and at an accelerated rate during May. Overall, the decline in incomes was the sharpest ever seen since data collection began in February 2009.

Prior to April, the strongest decline was seen in March 2009, although the two most recent drops in incomes outpaced this by a wide margin. Job security perceptions sank into deep pessimistic territory in April, and latest data revealed that perceptions remained at this level during May. Detailed data indicated that the negative job security outlook was broad-based across all industries. That said, as was also the case in April, there were little signs of stress on household balance sheets despite a further strong deterioration in earnings.

Debt levels held stable once again, while unsecured lending needs rose only slightly. The avoidance of rising consumer borrowing was largely achieved through a rapid drop in household spending, with this index falling to a survey-record low in May. More than half of all survey respondents (51%) reported a drop in household spending since April, with falling expenditure most widespread in the highest income brackets.

Joe Hayes, Economist at IHS Markit, which compiles the survey, said “It is unsurprising to see further woe for UK households in May, with our UK Household Finance Index revealing that finances remained under severe pressure.

“The financial toll of the coronavirus pandemic and the consequent public health measures has been heavy, with recent survey data showing unparalleled declines in workplace activity and incomes from employment.”

“It is also disconcerting to see so many survey respondents indicating concern towards job security, which could have a significant impact on consumer spending if the negative economic impact of the pandemic is protracted.”

“Nevertheless, there still appears to be little stress on household balance sheets, although this partly reflected a survey-record slump in household spending during May. Debt levels were broadly unchanged and unsecured lending needs such as credit cards barely rose. The concern for the household sector remains the labour market, which will be vital in determining the speed at which consumer spending can return once the economy emerges from the lockdown.”