According to a new report released by StepChange Debt Charity, living on the edge of problem debt (which is categorised as where people display three or more objective signs of financial difficulty) is now normal for millions of people across the UK.
The number of families with children in severe debt problems has risen by 16% since 2013, and now stands at 750,000. These individuals are more susceptible to ‘income shocks’ – changes in circumstances that lead to sudden falls in income, exacerbated by insecure work such as zero-hours contracts (67% of people on a zero-hours contract suffered an income shock in the last year).
The problems of insecure work are compounded by a lack of financial resilience, with fewer people owning ‘safety net’ savings. Nearly 75% of people who fell into problem debt relied on credit cards, overdrafts or borrowed from family and friends.
Mike O’Connor (Chief Executive of StepChange Debt Charity) stated that he believed that the UK’s welfare system should respond to people’s changing needs, and help people cope with short ups and downs, so that a temporary change in circumstances and resultant income shocks does not become a serious and entrenched financial problem.