A global study of financial consumer sentiment – including Great Britain, France, Germany and a number of other European countries – has shown the number of financially vulnerable households in Britain continues to rise with 22% (2012: 21%) now deemed ‘financially vulnerable’ and just 9% considered ‘financially secure’ – less than half the number in 2007.
The Genworth 2013 Index, by the global mortgage insurer Genworth, measures consumer financial security and vulnerability across Europe and the world. It looks at the extent to which households are experiencing financial difficulties and how they feel their financial situation will change over the year ahead.
The report – based on a survey of up to a thousand consumers in each of the 20 countries – shows that Great Britain has twice as many financially vulnerable households as those classed as financially secure, however it continues to outperform its traditional economic neighbours and has maintained its European placing.
Britain registered an ‘Index Score’ of 41 (2012: 39) on the scale of financial security placing it fifth on the European table ahead of both France and Germany but lagging behind the Nordic countries. Britain’s 9% of financially secure households compares favourably with Germany (10%) and France (6%) but again is bettered by the Nordic countries which have an average of 14%. The GB Index Score is 19 points down on the 60 it achieved in 2007.
The majority of British households – 51% – say they experienced financial difficulties at least ‘sometimes’ in the past 12 months. This type of pressure was more keenly felt by those under-55 (63%) than those over-55 (33%).
Optimism about households’ financial future is split between those who are under 35 years and those between 35-64 with the younger age group much more positive about their financial prospects. 37% of under-35s believe things will get financially better in the next year versus 17% who think it will get worse; 25% of 35-64 year olds think their financial situation will get worse while 19% believe it will improve.
Confidence about the prospects for the UK economy is currently polarised with 34% of households more confident than 12 months ago while an almost equal proportion (33%) are not. British households continue to face real concerns about their financial security with 41% saying they feel stress as a result of money issues and only 21% feel their job is more secure than it was a year ago. There is a clear relationship between financial well-being and job security: 55% of those who are financially vulnerable believe their job is less secure compared to 17% of those who are financially secure.
Genworth believes ongoing issues such as a fear of short-term financial troubles and poor job security is holding back the UK mortgage and property markets. The effects are leaving many households unable to save deposits for house purchase and unwilling to make a significant financial move, such as buying a property, because of uncertainty with regards to their ability to continue paying a mortgage should they lose their job.
Simon Crone, vice-president – Mortgage Insurance Europe at Genworth Financial, said: “Despite all the upbeat economic data and the growing positivity around Britain’s economic recovery it’s still obvious there is a wider ongoing trend towards households feeling more financially vulnerable than financially secure. Consumer confidence is lagging some way behind the recovery and, perhaps unsurprisingly, great swathes of British households are feeling less secure than they were pre-2007.
“The positive news is that Britain has kept up with its European neighbours and continues to place above both Germany and France. The number of UK households who feel financially secure has risen slightly, however we are still a long way from getting back on an even keel.
“There continues to be a marked age divide amongst British households with older people much more likely to feel financially secure than their younger counterparts. Having said this, we are seeing stronger levels of optimism from those in the younger age bracket that their financial circumstances are going to improve in the short-term. This could be put down to the improving economy and the falling levels of unemployment.
“Financial vulnerability comes from a number of different pressures including meeting higher cost of living expenses, ongoing low wage growth, its impact on savings levels and future concerns over job security. We still have many households that are financially fearful about what might be coming over the economic horizon and this undoubtedly is holding them back – particularly when it comes to making large, long-term commitments such as purchasing a home.
“British households remain cautious about their future financial position and it appears that a more sustained, long-term economic recovery is needed to lift more people out of the financially vulnerable bracket.”