Credit, Collections & Insolvency News
The use of Buy Now, Pay Later (BNPL) services has increased b 64%, according to research by Snoop.
The company has released its latest UK Consumer Spending Snapshot, based on transactions from over 100,000 customers spanning April 2021 to March 2022, highlighting a striking picture of a nation in the grip of the worst cost-of-living crisis in thirty years, with the effects being felt at all income levels.
In recent weeks, Ofgem’s raising of the energy price cap has hit all households and the war in Ukraine has intensified already high inflationary pressure worldwide. With a recent ONS survey showing 43% of people don’t expect to be able to save money in the coming year, and 87% noticing the cost of living rising in the last month alone, it’s clear that the crisis is all too real. However, Snoop’s data indicates that the squeeze on incomes began well before this Spring.
Even before the price cap was increased by 54% in April, energy bills had risen by a fifth in the last year, with those earning £50-75,000 seeing an increase of almost a third. Similarly, the average tank of fuel now costs 18% more, having climbed steadily throughout the year.
Alongside these rises in spending on essential household services, Snoop’s data showed notable spikes in indicators of financial distress. Use of credit card late fees rose 85% year on year, suggesting that more people were struggling to stay on top of their bills due to rising prices elsewhere.
Meanwhile, use of Buy Now, Pay Later services was up 64%, with those on the highest incomes recording the biggest rise: earners over £75,000 saw a 72% increase in use year-on-year, suggesting that rising prices are affecting every income bracket.
Businesses which had been battered by the pandemic recovered well in the year following the last lockdown being lifted: since April 2021, spend at gyms was up 138%, chain restaurants saw a 163% increase in takings, and spend on ride-hailing apps was up 44%.
However, this return to normality is likely to be seriously threatened by concerns about the rising cost of living. As consumers look for areas to tighten their belts, spending on these relative luxuries is already starting to tail off from last year’s high-water marks, with spend on ride hailing down a fifth and chain restaurants down a quarter on their post-pandemic peaks. Meanwhile, some companies which benefitted from boosted spending during the pandemic are now starting to see their revenues squeezed by tightening consumer budgets: For example, spend on food delivery apps was down 16% year-on-year.
Despite the pressures on household budgets, charitable donations soared, rising by 58% from February to March 2022 as the nation dug deep in reaction to the ongoing crisis in Ukraine. Snoop’s data showed a sixfold increase in donations to the British Red Cross in the aftermath of the invasion.
Archna Luthra, author of the report and Editorial Chief at Snoop, said “Snoop’s latest Consumer Spending Snapshot shows we are far from the peak ‘squeeze’ on household finances and few people will emerge with their personal finances unscathed. Inflationary pressure was having a substantial effect on households across all incomes even before April, as the prices of essentials have been rising by more than wages for just about everyone.”
“Signs of financial stress are already evident with more and more people turning to credit products like buy-now-pay-later. The really bad news is this will only deepen now that the price cap has actually increased, combined with the increase to national insurance contributions hitting pay packets this month. Bigger bills, higher prices and lighter pay packets will see spending power under huge pressure, particularly for the least affluent households. Unfortunately, there is no magic bullet. Right now, it’s about knowing and claiming what you’re entitled to, knowing where you stand based on a clear view of your bills and spending, and then doing as much as you can to cut back on the things within your control.”