[INSIGHTS]: Tracking Financial Vulnerability in the UK

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This report discussed creditor communications and financial difficulties. It highlights The Financial Vulnerability Index (FVI), a collaborative creation by Opinium, Lowell, and the Urban Institute, serves as a pivotal tool for measuring and tracking financial resilience across the UK. The index amalgamates unique consumer data and public measures to present a comprehensive view of financial vulnerability, aiding policymakers, local authorities, and stakeholders in enhancing financial resilience. The FVI reveals significant insights into financial vulnerability, showcasing a decrease in credit usage and adults in default, while highlighting an increase in reliance on social benefits.

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Key Points

  • Most FVI indicators have shown improvement, indicating resilience and recovery in the UK economy.
  • The proportion of adults in default and average credit use have decreased, reflecting a focus on reducing debt.
  • There is a decrease in credit usage, possibly due to higher interest rates pushing consumers to reduce credit usage.
  • The number of benefits claimants has increased to 8.6%, indicating ongoing economic challenges.
  • There are diverging trends of declining numbers in default and levels of credit usage, and a rise in social benefits.
  • Financial vulnerability impacts different cities and regions of the UK variably.

Key Statistics

  • Overall FVI score: 40.2
  • High-cost loans: 8.1%
  • Average credit use: 50.9%
  • Adults in default: 12.2%
  • Social benefits: 8.6%
  • Without emergency savings: 56.2%
  • The change in Financial Vulnerability Index scores from Q2 2022 ranges from a decline of 1.8 ppts in the West Midlands to 2.7 ppts in Scotland.
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Key Take Aways

  • The UK economy exhibits signs of resilience and recovery as indicated by the improvement in most FVI indicators.
  • A decrease in the proportion of adults in default and average credit use signifies a shift towards debt reduction.
  • The unexpected decrease in credit usage may be attributed to higher interest rates influencing consumer behavior.
  • The increase in benefits claimants to 8.6% highlights the persistent economic challenges faced by some individuals.
  • Diverging trends in financial indicators suggest varying pressures and trends on UK households.
  • Regional variations in financial vulnerability necessitate tailored policy responses for different urban areas.

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