UK families increase debt by half
Cash-strapped UK families increased their levels of personal debt by 48% over the past year, according to a report from a leading insurance firm.
Aviva’s Family Finances report found the average British family currently owes some £7,944 in unsecured borrowing, compared with just £5,360 in January 2011. The increase in debt levels is in spite of the fact that the typical monthly net income of families in the UK rose by 7% to £2,066 over the last year, up from £1,937 in January, 2011.
The Aviva report said rising incomes had failed to keep pace with soaring prices for essential items such as food and fuel, even though the increase in average incomes it reported outstripped the rise in the Consumer Prices Index (CPI) measure of inflation over the past year.
Worryingly, the number of families saving nothing each month rose to a record high of 42% over the past year, according to Aviva’s research. The average amount saved by households that do manage to put something by each month fell slightly from £22 in January 2011 to £21 this year. Despite this, the number of families with absolutely no savings at all fell from 33% last year to 30% this month.
The report found average spending in households ‘remained steady’ over the last 12 months, despite rising inflation. Housing remained the biggest monthly outlay for the average UK family, accounting for 20% of typical monthly household incomes. This was followed by food and debt repayment on 10% and 9% respectively. Spending on food has remained unchanged over the past year despite food prices rising considerably, suggesting that families are shopping around to make their budgets go further.
62% of respondents to the study said they were worried about the rising cost of living over the next six months, while 46% said they were concerned about being made redundant. One in ten people were found to be worried by the prospect of continued unemployment, suggesting that those who have been out of work for some time are becoming less confident about their prospects of re-entering the workplace, according to the report.
Louise Colley, Head of Protection Sales and Marketing, Aviva, said, ‘Families in the UK are still very concerned by the rising cost of living and levels of unemployment. While average incomes have increased over the past year, the prices of essential goods and services have also increased, meaning that families are struggling to keep up. Many appear to have acclimatised to this economic environment by shopping around and seeking to minimise their spending in certain areas. However, at the same time there are still a worrying number of families with insufficient savings or large debts.’
