The proportion of UK employees borrowing to meet basic needs has increased to more than three in five over the last year, up from slightly less than half, new analysis has found.
After surveying 10,000 employees, actuarial consultants Lane Clark & Peacock (LCP) also found that 54% did not feel in control of their financial future, which is 8% higher than in 2021.
Women were most likely to not feel in control of their finances, on 62%, compared to 41% of men, with the highest levels of borrowing found among people at the beginning of their working lives.
However, even higher earners are feeling the impact, with 64% having been impacted by serious debt either directly or by someone close to them in the last year, which is more than double the UK average of 30%.
LCP said that the findings point to rising levels of financial distress, made worse by the growing cost-of-living crisis, stagnant salaries and an overall lack of financial resilience.
“Often, it’s felt that financial issues only affect the young or lower paid,” said Heidi Allan, head of financial wellbeing at LCP. “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.”
Credit cards were found to be the most common method to borrow across age groups, which is a concern as high interest rates can lead to mounting levels of debt if not managed responsibly.
Borrowing from family or close friends was the most common method among younger people aged 16-24, which potentially adds further financial stress on parents and other loved ones.
The researchers also found that 57% of companies believe that their strategy to support employee financial health needs work or hasn’t yet been started.
LCP is now urging businesses to take immediate action to address how they can support their employees and put financial health on a par with physical and mental health.
“In recent years some companies have introduced workplace borrowing and salary advances and the number of employees using these has risen year on year,” Allan continued.
“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.”
Image credit: iStock
Author: Chris Seekings