One in five full-time workers is in the red, with nearly three million UK adults in problem debt, according to a charity.
A growing proportion of people are finding their full-time employment is unable to shield them from problem debt, StepChange revealed.
Its In work, but still in debt report noted that, in 2021, 38% of clients seeking debt advice were in full-time employment. But by December 2023, that proportion reached 44% – a 16% increase.
A separate poll by YouGov on behalf of the debt charity in January found that 2.8 million UK adults (9%) are in full-time employment but are in problem debt. This is half the total number of those in problem debt overall (5.6 million).
Meanwhile, 11 million UK adults (35%) possess at least one sign of financial difficulty.
For a quarter of individuals approaching StepChange, they cite the cost-of-living crisis for in-work indebtedness.
Indeed, four out of five told the charity that the cost-of-living increase was one reason why they were experiencing financial difficulty.
But, despite working in full-time roles, those struggling on low incomes are failing to cover essential expenses.
And one in 10 in receipt of Universal Credit payments are also struggling to make ends meet.
But the charity reported that four out of five in full-time work have a positive budget after receiving advice, which means they can afford to make ends meet once debt repayments are out of the picture.
StepChange said: “This means earlier and more effective support from lenders often could have prevented debt problems and serious financial difficulties from emerging.”
‘Forced to borrow to cope’
Richard Lane, chief client officer at StepChange, added: “It’s extremely concerning to see a growing proportion of our clients coming to us despite being in full-time employment. The challenge to keep up with the cost of living is dragging more and more people into a situation where they are being forced to borrow to cope with everyday costs.
“Urgent action is needed to improve the affordability of everyday costs like housing and energy, even for those in full-time work. Measures like an energy social tariff and boosting council tax support can make a real difference to struggling households. It’s also vital the Government extends and makes permanent crisis support like the Household Support Fund, which has been a lifeline for working households on low incomes facing hardship.”
Lane added that, for those on higher incomes, full-time work tends to mean easier access to credit, “but that doesn’t preclude them from the pressures of the cost-of-living crisis that can drive up unsustainable borrowing to cover everyday costs”.
He said preventing harm from consumer credit debt must be a key focus of the new Financial Conduct Authority (FCA) Consumer Duty, which requires firms to seek good outcomes for customers and take reasonable steps to prevent foreseeable harm.
“This report should serve as a reminder to lenders that, by spotting financial difficulty early and providing effective support and forbearance, they can prevent and arrest debt spirals,” Lane added.
Related: Quarter of Brits still struggling to cope with cost-of-living crisis
