British consumers are more likely than their European neighbours to count on credit to fund their lifestyles — in spite of being highly financially literate by comparison, research has found.
UK consumers are prepared to borrow more often than their counterparts in other countries, according to research published on Thursday. Of those who said they borrowed money to pay bills over the past six months, just under two-thirds of Brits said they had done so more than once in the period — nearly double the European average.
The survey, from credit management company Intrum, posed questions on “financial wellbeing” to 24,000 respondents across 24 European countries. It included queries on people’s ability to pay bills as well as their willingness to put aside money for savings.
The UK came second only to Finland in the ranking of financial literacy, after respondents were asked a series of questions about money matters. But the country came 21st out of 24 countries when those surveyed were asked how often they were borrowing to pay bills and how that borrowing compared with their monthly income.
“UK consumers are more financially literate than most of their European peers,” said Eddie Nott, Intrum UK managing director. “However, the reliance on credit to pay bills means that many don’t have the reserves to cope with the financial impact of a significant life event such as job loss, illness or bereavement. These unpredictable events often lead to problem debt.”
The cost of living has become a key issue in the general election, as the main parties promise an end to years of public spending austerity that followed the financial crisis. The Conservatives have pledged no rises in income tax, national insurance or VAT, while Labour is looking to higher earners to pay a bigger share of the tax bill. StepChange, the debt charity, has called on parties to address problem debt by setting up an independent regulator for bailiffs and setting standards for public sector debt collection.
The Intrum report found UK consumers were familiar with using technology to help manage their finances, with two-thirds (67 per cent) saying aids such as smartphone apps or websites helped them control spending, above the European average of 59 per cent.
However, technology can also fuel spending and borrowing. The Intrum report highlighted social media pressure on younger consumers, half of whom said they felt it encouraged them to consume more than they should, compared with 31 per cent of consumers across all age groups.
“While we see consumers are keen to use smartphone-enabled technology, concerns over data security and fraud remain, along with the pressure to overspend and the temptation to borrow more than they can afford,” Mr Nott said.
Money worries were underlined by the finding that about half (49 per cent) of British respondents said their bills were outpacing their income, creating higher levels of financial stress. Nonetheless, 78 per cent said they were able to save some money every month.