66% of people believe the cost of living crisis is amongst the biggest issues facing Scotland’s economy, according to the latest Understanding Scotland report.
The report – which draws on insights from 2,000 participants and makes for stark reading – outlines the economic impact of the cost of living crisis and paints an accurate picture of how people’s personal finances have changed in the past year.
There is widespread fear over the cost of living crisis and its impact on wider society as millions of people fall further into debt and, perhaps more tellingly, experience financial hardship for the first time.
In this article, we’ll summarise how people are coping with the cost of living crisis as the Bank of England continues to grapple with rising inflation in a bid to avoid another recession.
62% of people’s personal finances have worsened in 12 months
In the past 12 months, 62% of people believe their personal finances have worsened with 78% of this group expecting them to deteriorate further and only 3% expecting them to improve in the next 12 months.
This comes as only 5% of people believe the UK economy is in a better position than it was this time last year and 77% believe it will continue on a downward spiral.
In what was perhaps the most shocking statistic, however, only 8% of people reported an improvement in their personal finances since 2021 with rising inflation largely erasing wage gains.
55% of people don’t think their money goes far enough
With the inflation rate sitting at a 40-year high of 9% (a 7.5% increase from this time last year), it comes as no surprise that 55% of people feel dissatisfied with the extent to which their income meets their essential costs.
This highlights the rapidly-widening gap between wages and inflation in the UK as most people’s incomes remain unchanged despite prices rising at a rate of 9% per year.
It was larger households and families that found the past 12 months the most challenging, however, with 58% of people with children dissatisfied with the extent to which their income meets their essential costs.
23% of people are losing sleep due to anxiety over their finances
It is no secret that the cost of living crisis has become a cause for concern for millions of UK households but with the country’s economic outlook bleak at best and a recession expected before the end of the year, 23% of people are losing sleep due to anxiety over their finances.
This figure (just under a quarter of total people surveyed) rises to 28% for people living in deprived areas, 36% for parents, and 50% for people unable to work due to long-term sickness or disability.
Worryingly, the number of people reliant on emergency food parcels has also increased amongst people unable to work due to long-term sickness or disability with 14% dependent on food banks and 33% admitting their finances are ‘much worse’ than last year.
32% of people have dipped into their savings
With the COVID-19 pandemic far from over and the cost of living crisis deepening, 2022 has already proved to be a challenging year for the UK economy and, as a result, people have been urged to steer clear of their savings.
But with millions of households struggling to meet essential costs, 32% of people have been forced to dip into their savings just to cover the cost of large or unexpected expenses.
This can provide some much-needed financial support when times are tough but it can also be a slippery slope with 26% of people surveyed taking on extra debt and this figure rising to 31% to include people that have borrowed money from family or friends.
70% of people have cut unnecessary costs
In the past 12 months, 70% of people have cut unnecessary costs, such as social plans and leisure activities, in an attempt to save some spare cash.
59% of people have also gone without heating and 22% of people have skipped meals to make their money stretch further with these figures considerably higher amongst certain vulnerable groups and people living in deprived areas.
This means that, whilst the cost of living crisis has pushed luxury purchases like holidays and designer goods further out of reach for millions of people, a growing number of people are also finding it increasingly difficult to meet basic costs like food and warmth.
41% of people are saving less than usual
In response to rising prices, 41% of people are saving less than they typically would and only 4% of people managed to save more than usual last year in anticipation of further price rises.
But with 32% of people dipping into their savings to cover the cost of large or unexpected expenses and inflation on track to hit 11% before the end of the year, savings are also worth less than they were just 12 months ago.
This, coupled with the fact that 19% of people have turned to credit cards when they otherwise wouldn’t have, points to a sharp rise in financial vulnerability amongst almost every demographic in the UK due to the cost of living crisis.
