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Counting the costs: the impact of the cost of living on our clients

Jane Tully discusses our latest findings on the impact of the high cost of living on our clients

Jane Tully

Acting Deputy Chief Executive Money Advice Trust

Posted May 31, 2023

The impact of the high cost of living has reached into almost every household, but for many people who were already struggling the financial effects have been severe.

The Joseph Rowntree Foundation’s latest cost of living tracker brings into sharp focus the experience of high costs on low income households, and recent data from Citizens Advice lays bare the way these challenges have impacted the people who contact their service for support.

Our recent Counting the costs and Shrinking margins briefings add to this insight and shines a spotlight on the impact this crisis is having on callers to our National Debtline and Business Debtline advice services. Based on findings from our client surveys, these briefings outline the challenges that our callers face as the cost of essentials rises and household budgets are unable to keep up.

Falling behind on essential costs

Falling behind on essentials was a common theme amongst the people we surveyed. Unsurprisingly, as bills have gone up significantly, falling behind on energy costs featured highly amongst the people we surveyed. A quarter (25%) of National Debtline and one in five (19%) of Business Debtline callers had fallen behind on their energy bills.

Keeping up with council tax bills and buying food and groceries was also becoming increasingly difficult for many of the clients we surveyed. In both cases, the proportion of clients who had fallen behind on payments for these had increased compared to the same time last year.

The rise in the proportion of clients behind on their council tax is particularly worrying. Council tax is a priority bill, and falling behind on even one payment can make someone liable for a whole year. If repayment isn’t affordable, and for our clients with budgets stretched to the limit it often isn’t, debt collection activity can quickly escalate.

For Business Debtline clients, the situation is made more acute by competing business costs. Since 2019, the average amount of debt owed amongst callers to Business Debtline has risen 43% to £37,434.

And as most of our clients run their businesses from home, falling behind on energy bills not only impacts household budgets, but in many cases, also the viability of running their business.

Mounting pressure on households and small business finances

All of this is leading to difficult choices for people who contact our advisers for help. More than half (57%) of Business Debtline clients and two thirds (66%) of National Debtline clients surveyed had gone without essential items like food, toiletries or clothing because they could not afford them.

Many of our clients are turning to credit to plug gaps in their budgets. A third (32%) of National Debtline and Business Debtline (31%) clients surveyed reported using credit to cover essentials like energy or council tax. As costs remain high, debts are mounting. This is demonstrated by the amount owed across different debts. More than half (57%) of National Debtline clients have between one and five debts, and 14% have more than 10 competing debts.

For Business Debtline clients, the overlap in personal and business finances is common – with implications for managing cash flow and budgets. The average amount owed in personal overdraft payments alone amongst Business Debtline clients has increased by 22% since last year.

A difficult time ahead The economic outlook is predicted to show some flickers of improvement later in the year, but with costs set to remain high for some time, the challenges for the people we help are far from over. More than three quarters (79%) of National Debtline clients surveyed said they were worried about being able to pay for essentials going forward due to rising costs. Worries about energy bills featured strongly here – two thirds of National Debtline and more than half (56%) of Business Debtline clients we spoke to were worried about affording their energy costs in the coming months.

In many cases, this period of high costs has created additional barriers to resolving debts. Our advisers at National Debtline are hearing from people with increasingly complex cases. Two in five clients (41%) have not enough coming in to cover essentials (or a ‘deficit budget’), the average shortfall per month is on the increase, making everyday costs exceptionally hard and paying off existing debts more challenging. Taking into account an increased reliance on credit, and there are clear implications for debt difficulties further down the line.

The situation is similar for Business Debtline clients, but with one key difference – these clients are often also dealing with competing business debts with personal and business finances often overlapping. More than a quarter (27%) of Business Debtline clients are now grappling with more than 10 debts – and with many yet to see their businesses recover from the pandemic, the road to recovery is far from straightforward.

Supporting our clients

All of this has consequences for how best we help our clients. The major enhancements to our National Debtline and Business Debtline services, which are now well underway, will go some way in helping. This includes Business Debtline acting as the UK’s only Centre of Excellence for small business debts, providing online resources for money advisers across the sector through a new AdviserHub launching soon, as well as training through our Wiseradviser service. We have also launched our National Debtline partnership with Citizens Advice and Mental Health UK’s Money and Mental Health, which provide telephone casework for clients who need additional support.

The cost of living crisis has brought the importance of access to debt advice services like ours into sharp focus. We will continue to do all we can to improve the way we help the people who contact us for help, as well as working with partners to support people and small businesses through this crisis. There is much more that still needs to be done, including ensuring a range of safe routes out of debt, an area we will continue to focus on in the coming months.


Jane Tully

Acting Deputy Chief Executive Money Advice Trust

Jane Tully is the Trust’s Acting Deputy Chief Executive and has served on the charity’s Senior Leadership Team since 2014. She leads our work on policy, communications, marketing and research. She previously worked for the Charity Finance Group, Charity Commission, NSPCC and local government. View all posts from Jane Tully.




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