While the outlook for the UK economy may be looking decidedly brighter, with the Organisation for Economic Co-Operation and Development (OECD) forecasting that the economy grew by 1.5% rather than 0.8% in 2013, it should logically follow that Brits should be getting some much needed respite from their money woes.
However, it seems that for some consumers their debt worries are far from over, with research conducted by USwitch revealing that almost a quarter of borrowers (24%) are trapped in a cycle of debt, needing at least three more years to climb their debt mountains.
For a further 7% of consumers the situation is even more dire, with this group predicting that they will never be truly free from debt.
The research also revealed that Yorkshire and Humber was the most debt-laden region, with borrowers here owing an average of £2,902. In contrast, those living in the East Midlands carried the least debt at an average of £1,988.
The findings of the study also highlighted that men slipping into the red over the last 12 months were doing so by £769 more than their female counterparts. However, despite this fact the research revealed that men are less hung up about their debt levels.
Commenting on the plight faced by consumers, Michael Ossei, personal finance expert at uSwitch.com, said: “People are running out of ways to fund their ever-increasing household bills, and with salaries failing to deliver, many are being forced to turn to debt just to stay afloat. But it’s easy to borrow just a bit too much and then find yourself in over your head.”
He also went on to argue that managing debt was the key step to tackling rising debt.
“Instead of trying to play catch up by taking out more loans and credit cards, the first step is to make your debt manageable again.”
Here we look at two of the reasons why debt has remained an issue for Brits, despite an improving economic backdrop.
The wage squeeze
An analysis of official figures by the Trades Union Congress (TUC), the national trade union centre in the UK, revealed that workers in the East Midlands have seen a significant squeeze on their wages over the last five years.
Comparing hourly pay rates in 2007 (at 2012 prices) with those in 2012, the TUC revealed that employees in the East Midlands working a 40-hour week have lost £25.53 from their pay packets in real terms.
Within the region, those living in Leicester saw the biggest squeeze on their wages, with a 10.4% fall in real hourly pay equating to a £42.13 loss in weekly pay packets in real terms.
And it is not just employees in the East Midlands who are having to tighten their belts as a result of a downturn in real hourly pay. Across the UK wages have fallen by 6.3% or £30.30 in real terms for full-time employees.
Commenting on the figures, Midlands TUC Regional Secretary Rob Johnston, said:
“Workers’ real hourly pay rates have taken a hit over the past five years because wages have failed to keep up with inflation. But this fall is also a result of the worrying increase in insecure and short-hours employment.
“And in many cases when people have lost their jobs, and are fortunate enough to find work, they are forced to take jobs with fewer hours and on lower rates of pay. This is not the way to build a strong economy – the UK needs far more better jobs on much better rates of pay.”
Rising cost of living still putting a strain on finances
According to Gillian Guy, Chief Executive of Citizens Advice, the rising cost of living is still a key concern for consumers attempting to balance the books.
Recent figures from Citizens Advice revealed a staggering 78% increase in the number of enquiries made about foodbanks at the bureaux, while a survey revealed that one in four parents are turning to borrowing to fund the cost of their children’s school uniforms.
Commenting further, Ms Guy argued that the above scenarios indicate the economy may not have made a full bounce back.
“An economy within which foodbank enquiries are rising fast and in which parents go in to debt to send their children to school correctly attired cannot be said to be fixed.