Almost 2.5 million households struggling financially despite better economic backdrop

12th August 2014

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Despite the UK’s vastly improved economic backdrop and a more buoyant jobs market, one in eight households are still battling to make ends meet.

According to Legal & General’a latest MoneyMood survey the number of homes who say they do not have sufficient income to pay their bills has risen by 264,000 over the past year to a massive 2.4m in July.

The report found however that the average monthly shortfall has gone down year on year. The latest numbers show the average monthly shortfall is now £60 across the UK, a fall of 30% compared to July 2013’s £85. Regionally the figures tell a similar story with nearly all regions except the Midlands and the South West showing a lower monthly shortfall for homes struggling to pay bills and debts.

John Pollock, chief executive officer, Legal & General Assurance Society said: “Despite the recent upturn in the UK economy our MoneyMood survey shows we are not yet seeing an upturn in household finances with more homes worse off this year compared to July 2013.

“The number of homes who are struggling to make ends meet has risen significantly year on year. In July 2014 a quarter of a million more homes are struggling to avoid sinking into debt than at the same time in 2013. Perhaps a clear sign that household income growth continues to lag behind economic growth. However, in a glimmer of good news for those families whose earnings do not cover paying bills and debts, the average shortfall has fallen.”

The biggest fall in monthly shortfall is in East Anglia where the average is £59, down £196 per month compared to last year while the steepest rise is in the South West, which at £30, marks an increase of £188 per month compared to last year.

The North West, at £44 per month is down £110 compared to July 2013 and the North East, at £113 has witnessed a fall of £187.

Four regions have reduced their monthly shortfall by smaller amounts compared to July last year. The average monthly shortfall in London is £56, down by £55 from £111, the South East, at £78 which marks a £26 drop, Scotland which is £19 lower at £38 and Yorkshire and Humberside at £51 – a drop of £18.

In late July the the first estimate of UK GDP growth for the second quarter came in as predicted at 0.8%, meaning that Britain’s economic output has finally surpassed its pre-crisis peak.

But Ben Brettell senior economist at broker Hargreaves Lansdown believes not all is as promising as it looks. He said: “We are still struggling with a substantial consumer debt burden. Outstanding personal debt stood at £1.445 trillion at the end of May, up from £1.425 trillion a year earlier. It is this level of indebtedness, combined with the lack of wage growth, which I believe will deter the Bank of England from raising interest rates in the near term.”

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