One In Five taking On Debt To Fund Everyday Costs

Wed, 16 Jun 2010

Almost one in five people in the UK are getting into debt in a desperate attempt to meet their everyday living costs, new research has revealed.

A survey carried out by consumer site uSwitch.com revealed that public confidence in the economy is at rock bottom ahead of next week’s emergency Budget, with half of the population feeling that they are financially worse off than ever before.

It found that 18 per cent of adults, equal to roughly 9 million people, are turning to debt to stay afloat and 14 per cent are struggling to meet debt repayments .

Looking ahead, the survey also found that that 13 per cent (6 million people) believe they will struggle to pay their monthly household bills on time over the next six months, while a further 8 per cent (4 million people) think they may have to default of credit repayments .

Furthermore, it showed that almost a quarter of consumers (22 per cent) may not be able to meet their debt obligations if the government increases interest rates to 2 per cent.

In preparation for next week’s emergency Budget, uSwitch said 54 per cent of British consumers are cutting back on their spending, 10 per cent are reorganising their debts ahead of possible Capital Gains Tax (CGT) change, 9 per cent are making big purchases now in case of a VAT increase, and 36 per cent are putting off any projects that would involve increasing their borrowing, such as major home improvements.

Ann Robinson, director of consumer policy at uSwitch, said: "Consumers are working hard to stay afloat but are in for a tough time. Short-term debt solutions may be an easy way to fund the cost of living but they can lead to severe debt issues if not managed properly."

"Rather than continuing to plug the hole by borrowing, consumers need to work harder to strip down their essential bills to the bare minimum. This is crunch time for UK households."
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