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LV= Survey Reveals How the Nation’s Households are Coping With the Impact of Rising Inflation

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5 min read Partner content

With the latest inflation figures stubbornly remaining in double digits, families across the nation are facing hard choices about how to cover the costs of food and bills. A major survey from mutual LV= reveals just how rising prices are impacting on consumers across the UK.

The impact of inflation on consumers continues to dominate the front pages as we head further into 2023.

Post-Covid pressure on supply chains, restrictions on the import of gas to Europe, and upward pressure on costs of energy have created a perfect storm of rising prices.

But what does this mean for the everyday spending decisions of UK consumers?

A major survey by leading mutual insurer LV= (Liverpool Victoria Financial Services) has now lifted the lid on the impact of rising prices on the nation’s spending habits. It reveals a nation deeply worried about its finances. However, it also provides some early indications that, after a hugely challenging period, consumers are finally starting to feel more positive about their financial futures.

The research quizzed a nationally representative sample of 4,000 UK adults about a range of wealth and wellbeing subjects. These included how their spending habits have changed, plans for retirement, and how their finances are impacting on their mental health.

Clive Bolton, Managing Director of Protection, Savings & Retirement at LV= told PoliticsHome that the findings of the research illustrate the way that financial uncertainty is affecting UK households.

“Inflation has risen to levels not seen for decades and the UK’s personal finances have deteriorated significantly over the past 12 months,” he says. “The LV= Wealth and Wellbeing Research Programme has highlighted how millions of people have been squeezed financially over the past year as rising energy bills, interest rates and inflation reduce their spending power.”

The survey reveals that millions of people are anxious about their finances, struggling to pay day-to-day costs, and increasingly worried about money.

“Our survey shows that the cost of living crisis is very much at the forefront of people’s minds in the UK,” Bolton tells us. “Nearly half of UK adults (46%/25m) told us that they are feeling stressed or anxious about money at the moment.”

That level of anxiety is translating into pressure on other key services such as the health system. The number of people who say they have sought face to face mental health support due to money worries has increased in the last 12 months, with 5 million Britons trying to access help. With waiting lists for community mental health services currently at around 1.2 million, this adds pressure to an already overstretched NHS.

It is no surprise that the cost of food and energy top the list of concerns. 37 million people (69%) say that in the past three months they have seen an increase in their total monthly outgoings.

This pressure on finances is causing real anxiety for many families. And the poorer you are, the more likely you are to be concerned. Half of those with an annual household income of less than £25,000 describe themselves as stressed or anxious compared to just 31% of households with an income of over £100,000.

The way that rising prices are impacting the most on poorer households comes as no surprise to Bolton.

“Higher inflation typically hits lower-income families much harder than other groups,” he explains. “Especially when prices for food and domestic utilities such as water and heating are rising at such a rapid rate.”

His analysis is supported by the latest inflation figures from the ONS. Although the headline rate has now fallen to 10.1%, food and drink inflation remains at close to the highest rates since the 1970s. The soaring price of milk, bread and other basic essentials has pushed up prices by almost 17% in a year. This means that because household essentials show the sharpest rise, it is lower-income households that feel the squeeze the most.

As well as charting their growing worries, the survey also highlights the different ways that consumers are responding to pressure on household finances. Almost a quarter of all UK adults, a staggering 13 million people, told researchers that they have cut back on holidays and days out to meet the cost of rising bills.

Others have tried to find ways to increase their income. 4 million UK adults (7%) told LV= that they have taken on a second job or overtime to help balance their household budgets.

But with the nation’s pay packets not keeping pace with rising prices, many consumers are still struggling to cover their monthly costs. Around 12 million adults (22%) are dipping into savings to cover living costs, while 3 million (6%) say they are borrowing on credit cards and taking on additional loans simply to make ends meet.

“The fact that people are using their savings or taking on extra debt is a real concern,” Bolton tells us. “This could potentially turn a short-term crisis into a long-term problem. It will mean that many families will continue to feel pressure on finances, even if the headline inflation rate does continue to fall.”

Overall, the picture painted by the research is one of worried Britons, higher debt, changes to work patterns, and shifts in spending habits.

However, within the data there are also some early signs of optimism.

“After 12 months of steady deterioration, several of the indices we track have stabilised or improved compared to the previous quarter,” Bolton explains. “For example, this is the first time that our two key indices - measuring financial outlook over the next three months and finances over the previous three months - have begun to improve since autumn 2021.”

Whilst Bolton is cautious about whether this represents the start of a long-term improvement in people’s finances, he does believe that if the cost of living and inflation do begin to ease, people will begin to feel more optimistic about their finances.

“These are small but welcome signs that consumers are finally seeing a brighter future for their finances,” he tells us. “However, what this survey shows is that inflation, the rise in the cost of living and especially the big rise in energy and food bills continue to have a huge impact on people’s everyday lives. This is creating both immediate and longer-term challenges for individuals, families, and the wider UK economy.”

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