Five million working people now face the prospect of being unable to meet their financial commitments, according to new research shared with City A.M. this morning.
from Baringa, the business consultancy.
In the wake of the pandemic and with inflation at a 30 year high, specific groups of workers, such as women and young people, are found to have experienced the biggest increases in vulnerability.
Locations such as London are also pinpointed as being areas where risk of defaulting on commitments may increase most among working people.
The findings, compiled by consultancy firm Baringa, likely exacerbated by the effects on energy prices from the war in Ukraine and have prompted calls for businesses to implement swift and proactive measures, or risk leaving themselves vulnerable to financial and reputational damage and placing the financial futures of millions of customers in peril.
The firm’s so-called Vulnerability Index reveals people aged 18-22 are over three times more likely to be unable to meet their commitments than the working population average. 72 per cent are in band 5 – people deemed at most risk of being unable to meet their commitments, compared to 15 per cent on average.
Gender is also a strong indicator of vulnerability but the effect changes over the course of a woman’s working life.
Working women aged 23-29 are shown to be more financially stable than their male peers (with 11 per cent of women in band 5, compared to 14 per cent for men), but this trend reverses in the 40-49 age bracket, where women are at much greater financial risk (26 per cent of women in band 5, compared to 1 per cent for men).
The location and occupation of workers also impact their finances in ways that challenge conventional wisdom.
Those in London have been particularly exposed, likely due to several factors.
Firstly, the capital has the highest concentration of at-risk employment sectors – London has around 15 per cent more workers in the six most at-risk sectors of the economy compared to the UK average.
Secondly, furlough rates in London were consistently above the national average.
Thirdly, in the past year the cost of living in London has grown at the highest rate of any UK region.
Under the radar
The new picture of the risk of financial vulnerability amongst the working population has prompted fears that vulnerable sectors of society may be going under the radar.
While support measures are not keeping pace with reality, potentially millions of working people are at risk of falling into arrears, tarnishing credit scores and personal bankruptcy.
“Whereas those who are not in work and the elderly are well known as being at financial risk, the pandemic and rising inflation have created conditions where more unexpected groups may not be able to pay their bills,” said Baringa Partner James Cooper.
Cooper told City A.M. today that “until now this has been under the radar. What we have identified is a worryingly large cohort of people in a position where, if help isn’t provided, they will find themselves in a precarious position. These are working people and they are worried.”
“Organisations such as energy companies, banks and utility providers have a fundamental role to play in order to avert a crisis that will draw in millions of working people and create unexpected risks,” he continued.
“Crucially, past patterns of financial vulnerability cannot be expected to repeat. Identifying where financial vulnerability is likely to emerge will be key to heading it off,” Cooper concluded.