UK Managing Household Finances Market Report 2022
£ 2,195 (Excl.Tax)
Description
The UK Managing Household Finances Market Report identifies the impact of inflation on consumers’ spending patterns, consumer confidence and priorities when managing household finances.
Managing Household Finances: Current Landscape
Soaring rates of inflation and the increase to the energy cap are having a significant impact on consumers managing household finances. The ongoing conflict in Ukraine is likely to exacerbate inflationary pressure, with further supply chain issues and rising fuel prices. While many households say their finances are ok in the short term, the key issue will be the longevity of continued increases in living costs. With some consumers already struggling, financial providers will need to provide additional support.
Managing Household Finances: Industry Statistics and Trends
While households can cut back in some areas and adjust spending patterns regarding travel, leisure and entertainment, for many, there will be little room for manoeuvre. Those already limiting energy usage and shopping at the cheapest supermarket for groceries will need additional financial support. Some will be forced to increase their borrowing, and there is a risk of households struggling to cover housing costs or defaulting on existing lines of credit.
- 42% of Brits describe their financial situation as ‘Ok’.
- 74% of UK adults are concerned about the increase in fuel and heating costs on their household finances.
- 70% of Brits consider paying household bills as their highest priority when managing household finances.
- 56% of UK adults like to use online/mobile banking to check their bank balances.
Managing Household Finances: Future Trends
As with the pandemic, the cost-of-living crisis could be a driver of change in consumer habits. Open Banking has been relatively slow in adoption, mainly due to a lack of awareness. There is no better time for banks and aggregators to highlight the benefits and launch innovative new tools to help consumers find cost savings and the most appropriate financial products.
To discover more about the UK Managing Household Finances Market Report 2022, read our UK Personal Pensions Market Report 2022, or take a look at our Financial Services Market Research Reports.
Quickly Understand
- The impact of the rising cost of living on managing household finances and consumer confidence.
- The impact of inflation on consumers’ spending patterns.
- Priorities when managing household finances as prices rise.
- Preferred methods of managing household finances.
- Consumer financial education.
- Whether or not people set themselves a household budget and the tools they use to help stick to that budget.
Covered in this Report
Brands: Barclays, HSBC, Lloyds, NatWest, Santander, Klarna, Laybuy, Clearpay, Zinia, Shawbrook, Keebo, Koody, Kalgera, ClearScore, Tesco, Iceland, Motatos.
Expert Analysis from a Specialist in the Finance Sector
This report, written by Adrian Reynolds, a leading analyst in the finance sector, delivers in-depth commentary and analysis to highlight current trends in the market and add expert context to the numbers.
With unprecedented inflationary pressure and soaring energy bills, managing finances could prove a difficult task for many households. Although many can withstand the rising cost of living in the short term, the key issue will be how long price increases go on. If financial services providers can boost awareness, the cost-of-living crisis could become a driver in the adoption of Open Banking platforms as consumers become more prepared to trade financial data for cost savings.”
Adrian Reynolds
Senior Analyst – Financial Services
Table of Contents
-
Overview
- Key issues covered in this Report
- Market context
-
Executive Summary
- The market
- The majority of people’s household finances are OK…for now
- Figure 1: Household finances, 2022
- Inflation expected to reach 10% in 2022
- Figure 2: CPIH and CPI, 12-month rates, 2019-22
- Surging fuel bills the leading concern as energy cap rises 54%
- Food and drink prices are worrying two thirds of households as supply chain issues continue
- Figure 3: Factors impacting financial situation, 2022
- The consumer
- Half of adults are entirely responsible for household bills but a gender gap remains
- Figure 4: Responsibility for household bills, by gender, 2022
- Impact of inflation already evident as bills and groceries top priorities
- Figure 5: Financial priorities, 2022
- Checking balances via digital banking is the leading way to manage finances
- Figure 6: Methods of managing finances, 2022
- Financial providers must boost education in a dynamic environment
- Figure 7: Financial education, 2022
- Strong opportunity for budgeting apps amongst younger Brits
- Figure 8: Budgeting, by age, 2022
-
Issues and Insights
- Financial providers must advise consumers on the rising cost of living
- Expert talks and events to boost financial education
- Raise awareness of the benefits of Open Banking
- Financial management tools can help people save money while also saving the planet
- Focus on equality to address the gender gap in managing finances
-
Economic Background
- Inflation expected to reach 10% in 2022
-
- Figure 9: CPIH and CPI, 12-month rates, 2019-22
- Bank of England increases base rate to highest level since 2009
- Figure 10: Bank of England Base Rate, end of month, May 2018-May 2022
- Bank of England warns GDP could fall sharply in late 2022
- Figure 11: GDP quarter-on-quarter growth, 2016-22
- Unemployment rate falls in first quarter with record job vacancies
- Figure 12: Average quarterly unemployment rate, 2018-22
- The conflict in Ukraine is set to exacerbate inflation
- Food supplies could be fit causing further price rises
- Three quarters of people are expecting the conflict to have an impact on finances
- Figure 13: Impact of the Ukraine conflict, March-May 2022
-
Market Drivers
- The majority of people’s household finances are OK…for now
- Figure 14: Household finances, 2022
- Rising cost of living will add pressure on many households’ finances
- Surging fuel bills the leading concern as energy cap rises 54%
- Food and drink prices are worrying two thirds of households as supply chain issues continue
- Figure 15: Factors impacting financial situation, 2022
- Pressure to focus on essential items could bring new measures of inflation
- Rising rate of NI is a concern for nearly a third of British people
- Fuel and food inflation concerns are rising
- Figure 16: Factors impacting financial situation, 2021-22
- Proportion worried about the year ahead returns to early COVID-19 levels
- Figure 17: Sentiment on the year ahead, 2020-22
- Increased housing costs will further the need for budgeting
- Brexit is deemed to be contributing to the cost-of-living crisis
- Figure 18: Brexit and the cost of living, 2022
- The majority of people’s household finances are OK…for now
-
Regulatory and Legislative Changes
- National Insurance rate rises 1.25 percentage points
- Government offers £400 discount as energy price cap rises 54%
- Prescription charges frozen for first time in 12 years
- Government suspends the triple lock on state pensions for 2022
- FCA Consumer Duty prioritises consumer financial wellbeing
- Regulation of the BNPL sector expected by end 2022 as consultation ends
- FCA to jointly oversee future of Open Banking in the UK
- Open Banking adoption could benefit as FCA drops the 90-day rule
-
Competitive Strategies
- Banks continue to close branches and invest in digital services
- Expansion of video chat could help to provide guidance on the cost of living
- Shared hubs could help continue to provide access to in-person support
- Banks move to increase mortgage interest rates following base rate rise
- Banks are increasing cover for defaults on loans
- Nationwide looks to ease the cost-of-living crisis through Community Grants
- BNPL sector looks to offline usage as demand for credit rises
- Klarna launches physical card for use in-store
- Growing popularity of BNPL is driving launches from banks
-
Innovation and Marketing Strategy
- Fintech start-up Keebo looks to improve access to credit
- Kalgera platform looks to help FS providers protect vulnerable people
- Using Open Banking could provide cheaper loans for Shawbrook customers
- ClearScore plays a key role in driving Open Banking usage
- Koody app offers budgeting without connecting to bank accounts
- Supermarkets focus on the rising cost of living
- Tesco encourages Clubcard customers to use expiring points
- Tesco pulls products from Aldi Price Match campaign to raise prices
- Iceland moves to offer discounts to the over-60s
- New discount supermarket Motatos could help reduce shopping costs
- Food waste initiatives offer a chance to help household finances
-
The Impact of Inflation on Spending Patterns
- Planned spending is proving resilient in the short term…
- …but there are signs of some consumers cutting back
- Figure 19: Spending intentions in the next three months, 2020-22
- The impact of the rising cost of living on…
- …supermarkets and retail
- …food and drink
- …technology and media
- …travel
- …beauty and personal care
- …leisure and foodservice
-
Responsibility for Household Bills
- Half of people are entirely responsible for household bills but a gender gap remains
- UK’s first female-centric financial management app launches
- Figure 20: Responsibility for household bills, by gender, 2022
- Sharing homes later in life could see fewer solely responsible for bills…
- …while requiring more bill-splitting apps that create credit history
- Figure 21: Responsibility for household bills, by age, 2022
-
Enjoyment of Managing Household Finances
- Open Banking can help make managing finances more enjoyable
- Struggling households need tailored support to make financial management more tolerable
- Figure 22: Enjoyment of managing household finance, by gender, 2022
-
Financial Priorities
- Impact of inflation already evident as bills and groceries top priorities
- Rising grocery costs will shape supermarket marketing…
- …while creating opportunity to fight food waste
- Figure 23: Financial priorities, 2022
- Rising energy cap will see majority focused on household bills
- Highlight cost of “vampire devices” to reduce energy bills
- Figure 24: Prioritisation of other households bills, by age, 2022
- Struggling households are more likely to prioritise housing costs
- Figure 25: Prioritising housing costs, by financial sentiment, 2022
- Leisure and entertainment is a low priority amongst struggling Brits
- Prioritise quality to avoid customers switching to rival services
-
- Figure 26: Prioritising leisure, by financial sentiment, 2022
- Saving for retirement a lower priority for many as prices surge
- Providers must help people plan for the future even if contributions fall short term
- Figure 27: Prioritising saving for retirement, by financial sentiment, 2022
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Preferred Methods of Managing Household Finance
- Checking balances via digital banking is the preferred way to manage finances
- Figure 28: Methods of managing finances, 2022
- Boost awareness of Open Banking benefits to drive usage
- Banks must maintain pace of innovation offered by aggregator apps
- Koody app could cater for those more cautious about their data
- Online and mobile banking is encouraging regular usage
- Figure 29: Frequency of using financial management tools, 2022
- Checking balances via digital banking is the preferred way to manage finances
-
Sources of Financial Education
- Parents lead the way in financial education…
- …but financial providers must boost education in a dynamic environment
- Offer expert talks on the cost-of-living crisis…
- …and help consumers understand sustainable products such as green mortgages
- Figure 30: Financial education, 2022
- Personal finance websites and apps will play a growing role
- Social media is already playing an important role in financial education
- Figure 31: Financial education and media, by age, 2022
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Household Finance and Budgeting
- Strong opportunity for budgeting apps amongst younger adults
- Figure 32: Budgeting, by age, 2022
- Budgeting tools must find cost savings to capitalise on regular engagement
- Figure 33: Household budgeting habits, 2022
- Expand features of financial apps to appeal to those not budgeting
- Help for struggling households must go beyond budgeting
- Sustainability features could provide added value to financial apps
- Figure 34: Reasons for not setting a budget, 2022
- Strong opportunity for budgeting apps amongst younger adults
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
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