Households in the UK are in a worse financial position as a result of the cost of living crisis than they were during the pandemic, according to Plend’s latest Financial Inclusion Report.

The ‘Financial Inclusion Report: the impact of a cost of living credit crunch’ - focuses on the impact of the cost of living crisis, personal and household finances, and the resultant impacts on access to financial services in the UK. The findings emphasise how badly some groups - such as young people and ethnic minorities - have been affected more by the crisis than by the pandemic, thereby contributing to the increase in financial exclusion of those looking for support.

Ethnicity and poverty factors
The report highlights notable ethnic disparities, with over half (58%) of people from Black and minority ethnic communities borrowing money because of the financial impacts of the cost of living crisis - nearly double the proportion of white people doing the same (30%).

There are also a number of examples within the findings that highlight how the cost of living crisis has exacerbated the ‘poverty premium’, the extra costs put on those on low incomes who have to pay for essential products and services. Ethnic minority groups are less likely to be accepted for loans, with over half of those who applied (54%) rejected in the last 24 months, and those who were accepted faced higher-than-average APR rates. This is in comparison to 38% of white people who were rejected from loans in the last 24 months.

Regional disparities
The cost of living crisis has had a differential impact on regions within the UK. People in the North West have been most heavily affected, with more than 3-in-4 people (78%) saying they are in a worse financial position now than at the start of the crisis, followed closely by those in Wales (76%).

This financial vulnerability is in turn affecting people’s well-being, with over half of Londoners (58%) saying their mental or physical health has been impacted.

Lack of access to credit is high, with Scotland having the highest loan rejection rates of 2-in-3 people (66%), while a quarter of Londoners (25%) have found it difficult to access financial products.

Young adults and parents
Young people have been disproportionately affected by the cost of living crisis, as more than half of 18-34-year-olds (54%), the most of any age group, have borrowed money to ease financial pressures, in comparison to just over a third (35%) who borrowed money to offset the impact of the pandemic last year. The crisis has also had a detrimental impact on their well-being, with 2-in-3 (67%) claiming that it has affected their mental or physical health, compared to less than 3-in-10 people (29%) aged over 55.

It has additionally been found that 56% of the UK’s parents are borrowing money, in comparison to less than a third (32%) of adults without children.