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Household financial confidence: first green shoots appear

There are flickers of hope as worries about making ends meet begin to recede. But fears about finances long term and consumer concerns over socialising don’t bode well for the post-lockdown economy.

Tom Harrison
Content writer
2
minute read
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Posted 28 MAY 2020

Signs indicate that financial anxiety in the UK may have moved past its peak – at least in the short term. The proportion of households worrying about paying their bills has fallen from 20% to 19%, according to comparethemarket.com’s Household Financial Confidence Tracker, while those finding it difficult to manage their household finances fell from 18% to 16%, the lowest level since the tracker began.

There are also signs of hope among families with children at home, with 23% saying they struggled to pay household bills over the past seven days – down from 29% a week before, and 26% saying they are not confident about being able to meet future payments (down from 29%) – although the gap between these households and those without children at home remains.

Despite these encouraging signs, the future doesn’t look rosy. Three quarters (75%) of UK households have saved on average around £300 on day-to-day expenses during the lockdown, through things like not going to restaurants (65%) or the cinema (51%), and driving (31%) or commuting less (30%). A slightly higher proportion of families with children (76%) have made savings, with average savings noticeably higher at £414. But research suggests that household finances could be badly hit once the lockdown lifts and the cost of living rebounds.

Long-term fears

A quarter (25%) of households with children at home have had to dip into savings, 11% have borrowed from family and friends and 10% have had to take on additional bank debt. Nearly six in ten (59%) families with children at home think the economic impact of the pandemic will have a long-term effect on their household finances, a view that’s shared by 47% of families with no children living in the house. Almost a third of families with children at home (31%) say they will have to cut back or make sacrifices for 6-12 months after the lockdown ends. In fact, they fear easing the lockdown could increase their costs, with a quarter (25%) saying the reopening of schools and nurseries will put more pressure on their finances.

“We are starting to see green shoots of financial confidence from UK households, but the bad news still outweighs the good news – the savings households have managed to make during lockdown may offer some temporary respite, however, when lockdown lifts, the cost of living will go back to previous levels, rainy day funds have been raided and borrowing will need to be repaid,” says Anna McEntee, product director at comparethemarket.com.

“People are still very worried about the long-term hit their finances will take and this anxiety is especially pronounced among those with children at home and extra people to care for.”

Worries about socialising

While financial confidence may be growing slightly, willingness to socialise and get back into society seems to be shrinking. Over half of people (54%) say they wouldn’t feel confident about visiting public places such as restaurants, cafes, pubs and cinemas when they reopen. That figure has risen for the fifth week in a row and is up from 53% last week.

“The government has announced more details on its timeline to reopen the country for business, but the nationwide hesitancy to get back out into society could have a significant impact on the UK’s economic recovery,” says Anna McEntee, product director at comparethemarket.com.

Not feeling in control of their surroundings and so not enjoying themselves is the main reason for lack of confidence. 45% of respondents across all age groups cited this reason, with the figure rising to 56% among people aged 65 and over.

“Even if financial confidence is tentatively increasing across households, this will do little good for the wider economy if it doesn’t translate into the spending in retail and hospitality sectors which have been so heavily hit by the pandemic.”

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