One in five StepChange clients who are in work unable to make ends meet
24 April 2024
A new report from StepChange Debt Charity has found that one in five (21%) StepChange clients in full-time employment is in a negative budget – meaning their expenditure exceeds their monthly income, even after full debt and budgeting advice.
The report, ‘In work. But still in debt’ exposes a growing proportion of people whose full-time employment is unable to shield them from problem debt. In 2021, 38% of StepChange clients seeking debt advice were full-time employed (FTE), however, by December 2023 that proportion had reached 44%, a rise of 16%.
The report also reveals that full time work is not enough to stop a startlingly large proportion of people across the country experiencing financial difficulties. Polling conducted by YouGov on behalf of StepChange in January 2024 found around 2.8 million UK adults (9%) in FTE are in problem debt, half (51%) the total number of those in problem debt overall (5.6m). Meanwhile, a further 11 million UK adults (35%) in FTE are showing at least one sign of financial difficulty.
The cost of living crisis is cited as a major driver of in-work indebtedness among StepChange clients and the wider population; more than one in four clients in FTE (26%) cite is as their primary reason for debt, while one in ten (10%) also mentions the need to cover living costs as their main reason for debt.
This picture is replicated in StepChange’s national polling; among working age adults in full-time employment who found it difficult to keep up with household bills and credit commitments, around four in five (82%) cited a ‘cost of living increase’ as one of their main reasons for experiencing financial difficulty.
Despite being employed full-time, many StepChange clients are struggling with low incomes that fail to cover essential expenses. As well as highlighting the high proportion of those in negative budgets, the report shows one in ten (9%) FTE clients received Universal Credit payments, but still struggled to make ends meet.
Meanwhile, 4 in 5 StepChange clients in full-time work have a positive budget after advice, which means they can afford to make ends meet once debt repayments are taken out of the picture: this means earlier and more effective support from lenders often could have prevented debt problems and serious financial difficulties from emerging.
StepChange Chief Client Officer Richard Lane said:
“It’s extremely concerning to see a growing proportion of our clients coming to us despite being in full time employment. The challenge to keep up with the cost of living is dragging more and more people into a situation where they are being forced to borrow to cope with everyday costs, to the extent that one in five StepChange clients in full time work is now unable to make ends meet.
“Urgent action is needed to improve the affordability of everyday costs like housing and energy, even for those in full-time work. Measures like an energy social tariff and boosting council tax support can make a real difference to struggling households. It’s also vital the Government extends and makes permanent crisis support like the Household Support Fund, which has been a lifeline for working households on low incomes facing hardship.
“For those on higher incomes, full-time work tends to mean easier access to credit, but that doesn’t preclude them from the pressures of the cost of living crisis that can drive up unsustainable borrowing to cover everyday costs.
“Preventing harm from consumer credit debt must be a key focus of the new FCA Consumer Duty, which requires firms to seek good outcomes for customers and take reasonable steps to prevent foreseeable harm. This report should serve as a reminder to lenders that by spotting financial difficulty early and providing effective support and forbearance they can prevent and arrest debt spirals.”
Notes to Editors
- ‘In work. But still in debt’ utilises data gathered between 1 January to 31 December 2023, among clients who contacted StepChange for their first debt advice session, either through an online or telephony session.
- The statistics are based on 172,460 clients who are aged between 18-64, of which 74,428 are in full-time employment. This press release also includes data from YouGov polling which was commissioned by StepChange Debt Charity in January 2024. The poll surveyed a sample of 2,096 UK adults between 13-15 January 2024. The survey was carried out online and the figures have been weighted to be representative of the profile of all UK adults. This report primarily draws upon a subset of 18-64 year olds which comprises 1,518 respondents, of which 574 are in full-time employment.