Capital left behind as household finances improve elsewhere

London is the only major city in Britain where household financial health is worsening, according to new research by Lowell.

While financial pressure is beginning to ease across much of the country, London is not sharing in the recovery. Households in London are using up their savings: London is the only major city where emergency savings are deteriorating. Nearly 57% of Londoners have no emergency savings and 36% report either reducing the amount they save or spending down their savings.

London has also seen the largest increase in credit usage of any major city as income struggles to keep pace with the cost of living. Almost one in four Londoners borrowed more or took out additional credit last year.

The capital is falling behind on repayments, with late arrears having increased more sharply in London than anywhere else.

John Pears, UK CEO of Lowell, said “The past six years have been exceptionally tough for households, from the pandemic to successive global shocks and the knock-on impacts on the cost of living. It’s encouraging to see some early signs that financial pressure is beginning to ease in parts of the country.

“But this recovery is slow and uneven. Financial vulnerability is no longer confined to traditionally deprived areas but is becoming entrenched in places that were once seen as more resilient, including London. High housing costs, reliance on private renting and a changing labour market are putting sustained pressure on household finances in the capital.

“With another cost-of-living shock potentially looming, nearly half of households don’t have emergency savings and financial resilience remains fragile. Supporting households to rebuild buffers has to be a national priority or we risk undoing all this progress.”