UK Households Becoming More Optimistic About Their Financial Future, According to TransUnion

Research from global information and insights provider TransUnion tracking the financial impact of the ongoing COVID-19 pandemic showed consumer optimism improving as the second national lockdown came to an end. Four in 10 (42%) UK households are now somewhat optimistic about their financial future, up from 34% a month earlier.

The number of households reporting a negative financial impact also shows slight improvement from a month ago but stands at 50%, highlighting the split between those hard hit and those who have been able to weather the pandemic, in some cases with little financial impact.

For those that are struggling, mostly due to reduced working hours or job losses, the ability to pay bills remains a significant worry, with nearly two thirds (65%) expressing concern. Credit card bills are the most commonly cited (39%), closely followed by utilities (38%) and rent payments (29%). The average expected shortfall is £585.

Yet, at the other end of the spectrum, a quarter of UK households report that they are now financially better off than anticipated at the beginning of 2020, whilst a further 37% are finishing the year in the financial position they had anticipated.

Satrajit “Satty” Saha, CEO of TransUnion in the UK said: “Our Financial Hardship Study has tracked the impact of the pandemic on consumer finances since March and as we come to the end of 2020 the figures indicate a mixed picture. Those who expect to be unable to pay their bills envisage this happening in the next six to seven weeks, at the end of January, so businesses should be preparing for this and tailoring plans to help customers that are in difficulty. I’m heartened to see that the number of companies reaching out to explain payment options has almost doubled since our study began in March, now 41% versus 22%^[i].

“However, six out of 10 (61%) households are where they expected to be, or better off in many cases, with the radical lifestyle changes we’ve faced this year bringing cost savings on thigs like petrol, holidays, sports and socialising. This divide may be something that widens further in the months ahead, when government support schemes come to end.

“One thing that can affect everyone however, whether financially impacted or not, is fraud and our latest research shows that three out of 10 UK consumers have been targeted in a digital fraud attempt related to COVID-19, up from 22% in March. Consumers need to take extra precautions, particularly as we approach the holidays, with online shopping and delivery services ripe targets for fraudsters, whilst businesses need to be doing all they can to both educate and protect their customers.”

Brendan le Grange, director of research at TransUnion in the UK adds: “The rate of fraud attempts is highest among Gen Z (42%) and Millennials (36%) with current levels overall back at the highest we’ve seen. Phishing remains by far the most common type of fraud at 38%, followed by shipping fraud – one to be wary of this time of year, at 17%. The younger generations have been the hardest hit by the pandemic, in many ways. Gen Z feel the greatest financial impact, at six out of 10 (61%) and we see this impact steadily decline as the generations age. Yet, despite this, it’s the younger consumers that are showing the most optimism in terms of the future. More than half of Gen Z (57%) and 46% of Millennials are at least somewhat optimistic, compared to just 37% of Gen X and a third (34%) of Baby Boomers.

“Whilst there are still challenges ahead, with Christmas spending possibly heightening financial worries for some, our study shows that almost a third (32%) of impacted consumers still plan on using savings to help pay their bills and loans. Although there are longer-term implications regarding the savings that consumers have dipped into this year, it’s positive to see that these are still providing a cushion for many. A similar number (31%) are planning to negotiate partial payments with their lenders and nearly half (47%) of impacted customers have already reached out to their finance provider to discuss this.”

Read the latest Financial Hardship Study report from TransUnion here.