UK resilient as borrowing falls and financial health shows signs of recovery

Posted by: Lowell|September 20 2023



Our latest data shows a reduction in reliance on credit and debt payments prioritised

UK households proved resilient as they appeared to prioritise paying down debts and reduce reliance on credit, according to our latest Financial Vulnerability Index data. With rising interest rates, credit usage in the UK fell by 1.4% in the first half of 2023. This 
cutback on borrowing appears to have benefited those in receipt of state support.

The data indicates that interest rate rises are hitting hard-working families hardest, as areas with a high proportion of people in full-time employment have seen a stifled recovery in financial health. Lowell has identified 133 constituencies in the UK which have experienced worsening financial health, compared with the UK as a whole.

Across the board, areas with a high level of home ownership have seen the smallest recovery in financial health while areas with a high proportion of social housing tenants have seen a larger improvement.

The most financially vulnerable areas saw the greatest improvements in the first six months of 2023, but there are reasons to be concerned as benefits claims have ticked up slightly across the UK. While borrowing and loan defaults may have declined, they remain stuck persistently above pre-pandemic levels. The UK is still 12% more financially vulnerable than it was at the start of the index in Q3 2017.

After a winter which saw borrowing levels and loan defaults rise to record levels, pressure on UK households eased in the first half of this year, according to the latest update to our Financial Vulnerability Index.

Commenting on the data, Lowell's UK CEO, John Pears, said:

“With all the doom and gloom from the Government and the Bank of England, clearly customers are taking heed. We’ve seen a fall in credit usage and in defaults, demonstrating customers changing their behaviour to fit the current environment.

“The picture of the UK is not a uniform one, but the data shows that there is clearly financial resilience in the economy. But we’re not out of the woods yet. The UK is still more vulnerable than it was in 2017 and there is still an urgent need to address the long-term structural issues behind our relatively poor financial health.”

Full data set, trends report and interactive tool

The Financial Vulnerability Index is an innovative tool to measure and track financial resilience, nationally and locally, across the UK. Created by Lowell and the Urban Institute, and provided by Opinium, the index brings together publicly available measures and Lowell’s proprietary data to give a clear picture of financial vulnerability in the UK.

The Financial Vulnerability Tool is free to access or alternatively you can download the data and a summary of the key findings.

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