Households dipping into savings and relying more on credit

A third of adults have less than £500 saved for emergencies, leaving them heavily exposed to income shocks, according to a nationally representative survey of 8,000 UK adults from Lowell. Nearly half (46%) of UK adults saw their financial situation worsen in 2023 and nearly 70% do not expect their financial situation to improve in 2024.

The research showed that adults are using more credit to meet their daily expenses, with average credit use rising to 53%, the highest since the start of the Covid-19 pandemic. Credit usage rose by a notable 2.8% over the last six months of 2023, underscoring the ongoing struggle to make ends meet amidst macroeconomic uncertainty.

Data from Lowell’s 8 million UK customers also reveals that adults are relying more on credit to meet their daily expenses. Average credit use is the highest it has been since the start of the COVID-19 pandemic.

59.2% of adults have less than £5,000 in emergency savings. Of those, 32% have less than £500, including 13% who have no emergency savings at all. Whilst 46% of adults surveyed said their financial situation worsened in 2023. 33% said they expect their financial situation to get worse in 2024, while 35% expect no change.

Commenting on the data, John Pears, Lowell’s UK CEO, said:“The last 12 months have been a challenging time for many families. High inflation and high interest rates have forced families to make difficult choices just to keep their heads above the water, and our latest data shows just how worrying an impact this is having.

“The erosion of financial health not only impacts the immediate wellbeing of families, but also jeopardises the UK’s long-term financial resilience. While inflation is coming down and rates are holding steady, the benefits aren’t yet being felt on the ground. The Government needs to make sure that support for these families continues, even if headline numbers are coming down.”

Average credit use (Q3 2017-Q4 2023):