Urban city areas dominate new ‘debt snapshot’ of the UK

London, UK, 20 January 2016 – Financial problems have a clear geographic and social pattern in the UK. That’s the message coming from new research published today by Experian, the global information services company, and leading free debt advice provider StepChange Debt Charity.

The research used national data to analyse and map areas across the UK with the greatest concentrations of people seeking professional advice for debt problems, and areas where financial problems are most prevalent. The charity’s data was used to identify the social and demographic make-up of those people seeking advice.

Those on low incomes, young people in rented accommodation and young families appear to be the groups that are more acutely affected by debt-related problems. Britain’s ‘aspiring homemakers’ are coming under pressure from the high costs of living and comparatively low wages.

Inner cities and their surrounding areas up and down the country feature prominently on the list of places with the most debt related problems. Parts of East London and West Birmingham as well as Manchester and Hull topped the rankings for locations where people had ‘severe financial problems’ and had fallen behind with bills and credit commitments.           

The London Borough of Newham topped the rankings of places with the highest penetration of both real financial problems and the highest index of people having sought professional advice over debt. 

At the other end of the spectrum, locations across the southern counties and suburban London were identified as having the lowest levels of debt problems, with the Isles of Scilly found to have the lowest levels of problem debt in the UK.                   

Richard Jenkings at Experian, said: “When we analysed the people that have had to seek debt advice I was struck by the fact that every single type of person is represented. Our findings show that debt problems can impact people from all different backgrounds and circumstances.

“Although it is not a surprise that the need for advice on debt-related problems rises as average income levels fall and unemployment rates rise, evidently there’s also a significant number of people who have either lived beyond their means or whose circumstances have changed and have fallen into to debt. Anyone could be in their shoes.

“What is also interesting is that when you compare the average incomes of each place in the UK with the number of people seeking debt advice in those areas, there are places, such as parts of southern Essex and the Medway towns, which have far more problems than you might expect.

“Nobody would deny that it is easier to fall into debt if you have a low income, but this study has shown that there are also variations in people’s behaviour in different parts of the country.

“Over the course of 2015 Experian provided more than 55,000 free credit reports to people seeking help from debt advice charities, via a dedicated service set up to support free debt advice. What is clear is that unmanageable debt remains a significant challenge for millions of people around the UK.”

Mike O’Connor, Chief Executive of StepChange, said:

“This research gives us a crucial insight into the nature debt problems across the UK. Debt problems are most common in urban areas and certain groups within society are more acutely affected by problem debt but problem debt can afflict almost anyone and no area of the UK is unaffected.

“Consumers are borrowing to a level not seen since the pre-crisis period.  Debt is an issue that the government and policy makers must take seriously. Millions of households live on a financial knife-edge where vulnerability to debt is a persistent worry.

“We need concerted action by government to ensure better protections for those who fall into debt and better mechanisms to help people build precautionary savings.  By supporting people in building £1,000 in savings we could prevent 500,000 households from falling into problem debt.”

Top 10 locations where people have… “sought professional advice over debt problems”

Low income, renting and young families’ persistent cause of debt vulnerability

In order to establish the social and demographic make-up of people seeking advice for debt problems, Experian analysed StepChange client data over a five year period (2009-2014). In that time frame the charity advised more than 1.4m people. It found that certain groups were consistently more vulnerable to debt and more likely to need advice.

Among the charity’s clients, those on low incomes, people in rented accommodation and young families are significantly over-represented, indicating that these particular circumstances leave people particularly vulnerable to debt.

According to the Experian Mosaic group breakdown, ‘Family Basics’, ‘Transient Renters’ and ‘Municipal Challenge’ feature the highest demand for debt advice (for detailed explanation of the characteristics of these groups see the Appendix).

The research underlined the fact that debt can become a problem to anyone. The charity’s research shows that the majority of its clients’ financial difficulties began as a result of an income shock - a sudden change in circumstance that prompted a drop in income (e.g. redundancy, reduced hours, illness and relationship breakdown.)

Another important group over-represented for seeking debt advice are the ‘Aspiring Homemakers’, who are often severely stretched by the high costs of first time home ownership and of having a young family at a time when their incomes have not yet peaked. This shows that people working hard to achieve their aspirations face the real risk of having them dashed by problem debt.

This collaboration continues StepChange Debt Charity’s work to understand the latest trends around problem debt in order to improve how it can help those most in need of advice. Such evidence also informs its influencing work to improve how policy change can address the causes of problem debt and help people recover more quickly.

Appendix

Aspiring Homemakers

• Likely to be under 35 years old
• 50% have started a family
• Most likely to be working in full-time employment, typically in mid-level professionals jobs
• Majority are paying a mortgage on their semi-detached or terraced homes
• Usually single car families

Transient Renters

• Majority of this group are in their 20s
• Unlikely to be married
• Typically living in rented accommodation and have been there for less than three years
• Most earn less than £25,000 per year
• Few own a car
• Although they are high users of the internet, they are most unlikely to have landline telephone and rely on mobile phones for communication

Family Basics

• Likely to have children
• 10% have 4 or more children
• 50% rent from a social landlord
• Employment options are often limited by basic qualifications

Municipal Challenge

• Likely to be on the lowest incomes
• Most likely to be seeking employment
• Job opportunities limited by basic qualifications
• 1 in 8 don’t have current account

Methodology

Estimating the scale and distribution of debt problems in the UK and understanding its geographic pattern

Experian have coded survey questions by Mosaic to measure which types of people are over and underrepresented using the Experian Mosaic segmentation system which classifies the UK population. For each of the two key debt questions (“have you sought professional advice over debt” and “have you got real financial problems and have fallen behind with many bills or credit commitments”) Experian scored out each local authority in the country by knowing how many people of each Mosaic type live in that area and the relative propensity for each of the questions. The estimated penetrations were then calculated against the whole resident population and mapped. This gives us an understanding of the overall debt and financial stress geographic and social patterns in the UK as context.

Measuring the social and geographic patterns of people who have asked for debt advice

The second stage of the analysis consisted of Experian profiling the people that have actually sought debt advice from Stepchange in the last 5 years. Over a million people who had requested advice were profiled by Mosaic both for telephone and on line enquiries.  This gives us a clear picture of the social mix of those seeking help from Stepchange and allows us to compare the proportion in each Mosaic type with the UK population as a whole and identify the most over represented types of people.  The Stepchange enquirers were then aggregated geographically.

Notes to editors

Richard Jenkings is Lead Analytics Consultant at Experian.

The analysis was based on a sample group of 750,000 StepChange Debt Charity clients.

Mosaic is Experian’s system for classification of UK households. It is one of a number of commercially available geodemographic segmentation systems, applying the principles of geodemography to consumer household and individual data collated from a number of governmental and commercial sources.

Press contacts:

Nick Jones

Head of PR, Marketing Services, Experian

07583 297082

nick.jones@experian.com

James Jones

Head of Consumer Affairs, Experian

07967 567267

james.jones@experian.com

About Experian:

We are the leading global information services company, providing data and analytical tools to our clients around the world. We help businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making.

We also help people to check their credit report and credit score, and protect against identity theft.  In 2015, we were named by Forbes magazine as one of the ‘World’s Most Innovative Companies’.

We employ approximately 17,000 people in 37 countries and our corporate headquarters are in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.

 Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2015, was US$4.8 billion.

To find out more about our company, please visit http://www.experianplc.com or watch our documentary ‘Inside Experian’.

About StepChange Debt Charity:

StepChange Debt Charity provides free and independent debt advice by telephone and through its online Debt Remedy tool.

StepChange Debt Charity’s vision is a society free of problem debt. Our ethos is founded on helping people to repay their debts where they are able to do so. Where they cannot, we provide advice including, where appropriate, supporting them through insolvency processes. Our advice is always based on the best interests of our clients.

StepChange Debt Charity is majority funded by voluntary donations from lenders who support the work of the charity. All funding goes towards helping people in problem debt – this includes providing impartial advice, promoting the benefits of free debt advice, and managing all the debt repayment and debt relief options we provide.

StepChange Debt Charity campaigns for changes to public policy that will prevent problem debt and improve the situation of those affected. Details of the charity’s research can be found here.

StepChange Debt Charity is a trading name of the Foundation for Credit Counselling a UK registered charity in England and Wales (Company No: 2757055) (Registered Charity No: 1016630). Registered office: Wade House, Merrion Centre, Leeds LS2 8NG. It is authorised and regulated by the Financial Conduct Authority.

The StepChange Debt Charity free phone helpline 0800 138 1111 is open 8am to 8pm, Monday to Friday and 8am to 4pm Saturday.

Online help is available any time from StepChange Debt Charity Debt Remedy at www.stepchange.org

Follow us on Twitter: @StepChange and @Moneyaware