Financial distress bites as more than three in five employees borrow to meet basic needs across the UK

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The number of employees in the UK borrowing to meet basic needs has increased to more than three in five, (61%, up from 46% in 2021) pointing to rising levels of financial distress, finds new research from Lane Clark & Peacock (LCP), the independent consultancy firm1.

LCP says the rising levels of borrowing are likely to have been made worse by the growing cost of living crisis, aggravated by stagnant salaries and an overall lack of financial resilience. Their research warns that companies are not prepared for the increasing financial strain that will be placed on their employees as domestic energy bills, interest rates on borrowing and rising fuel and food prices start to bite.

The majority of companies responding to the survey (57%) said that their strategy to support employee financial health needs work or hasn’t yet been started.  LCP are urging companies to take immediate action to address how they can support their employees and put financial health on a par with physical and mental health, where companies have made good progress. With a clear link between financial vulnerability, mental health concerns and negative behaviours, companies with supportive strategies in place can improve workplace absence and productivity, and in turn, have a positive effect on their bottom line.

Over half (54%) of employees say they do not feel in control of their financial future, which marks an eight percentage point increase from last year. This is felt across all age groups, with the exception of the 25-34’s where we see a small improvement. Women are more likely to not feel in control of their finances (62%) compared to men (41%).

Cost of living crisis impacts those starting their careers

The highest levels of borrowing are found among people at the beginning of their working lives (73%) and those who are mid-career (71%). 

LCP has found that the most common method to borrow across age groups is on a credit card, which has remained the most common form of borrowing year on year. This is a concern as credit cards often have high interest rates and can easily lead to mounting levels of debt if not managed efficiently and responsibly.

Borrowing from family or close friends is the most common mode of borrowing for the younger age group (16-24), which potentially adds further financial stress on parents and other loved ones.

Chart 1: UK employee borrowing levels across age groups, 2020-2022

Significant lift in cost of living is even impacting higher earners

Even higher earners are also feeling the impact, with financial health representing the biggest concern for this age group when compared to mental and physical health. Almost two in three (64%) in this earning bracket have been impacted by serious debt either directly or someone close to them in the last year, which is more than double the UK average of 30%.

Heidi Allan, Head of Financial Wellbeing at LCP, says: “Often, it’s felt that financial issues only affect the young or lower paid. However, our latest findings show that even mid and higher earners aren't immune to money worries in the current extreme climate. Borrowing is a significant issue and employees in mid to high income brackets are likely to be the main income provider, or, have older dependents as well as young adults that rely on them, which can cause additional financial pressures.

“In recent years some companies have introduced workplace borrowing and salary advances and the number of employees using these has risen year on year. For many this has been helpful, although it’s quite worrying that more people have borrowed from a loan shark or payday lender rather than one of these corporate options. With people being forced to tighten their belts further as inflation bites, there needs to be urgent education between employers and employees about how programmes can be better used  to create savings and broader financial benefits.”



1LCP: Survey of 10,000 employees in the UK, conducted in November 2021. The survey included people between the ages of 16 up to 65+. Percentages may differ due to rounding.

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