Brits’ wealth has seen a sharp decline in the first quarter of 2022 as the cost-of-living crisis takes its toll, according to the latest data from the LifeSearch Health, Wealth & Happiness 2022 Index. The Index - compiled by modelling a range of data sources covering health, wealth, and happiness and monitoring changes over time - shows that 2021’s combined annual index score was 84.4, a slight rise on 2020’s score of 81.5, but still 15% lower than 2019’s pre-pandemic score of 99.4.
When studied in isolation, the UK’s wealth score for 2021 was 93.0 - a rise of 11% on 2020 - but fell sharply to 86.7 at the start of 2022 as the surge in the cost of living took its toll. The annual Index – conceived by LifeSearch, built by the Centre for Economics and Business Research (Cebr) and supported by ongoing consumer research – also found that a third (32%) of households feel financially worse off, rising to 40% among ethnic minority groups. This compares to just 24% of Brits who said they felt worse off 12 months earlier.
LifeSearch found that with inflation currently at 7%, a 30-year high, nearly three quarters of Brits (72%) expect to be worse off as a result of inflation. Of this group, more than half think they will be by at least £100 a month, one in 25 (4%) think they’ll be more than £1,000 a month down. On average, Brits think they will be worse off by £252 per month (£3,020 pa). Just 8% said they don’t think they’ll be worse off financially, the remaining 20% were not sure.
According to the study from LifeSearch, UK’s life insurance broker, 39% of Brits think the Covid pandemic has had a negative impact on their household finances, rising to 51% of people in ethnic minority groups, and higher still among Pakistani and Bangladeshi (58%) and Indian Brits (57%).
When asked in April 2022, three-quarters (74%) of adults said their mental health has been negatively impacted in the last two years and of these, the “rising cost of living” (28%), closely followed by “Covid restrictions” (27%), were the top causes. In comparison, just 7% of these said the conflict in Ukraine and threats from Russia had the most detrimental impact on their mental health.
The fear of bills rising is a significantly bigger concern now compared to last year, with almost half (45%) saying they are worried about the rising cost of bills; vs 24% last year. Older people (55+) are the most concerned (54%) about rising bills in 2022. Lack of savings (17%) is also a top concern for Brits this year - rising to 24% among ethnic minorities - followed by fears of higher taxes (19%).
Debbie Kennedy, Chief Executive at LifeSearch who commissioned the study said: “While there may be a sense that after two long years the worst of the pandemic is behind us, the nation’s health, wealth and happiness is still not close to being back to levels seen pre-Covid. In fact, our happiness is at a record low, mental health issues remain high and the energy crisis, inflation and conflict in Ukraine point at another chapter of uncertainty.
“At a more granular level, our study reveals the pandemic pressures and consequences faced specifically by people in ethnic minority communities, where many have been hit harder over the last two years and the ripple effect may continue much longer. Many in those communities feel they’ve had to work harder, dig deeper and risk more to stay afloat.”
Nina Skero, Chief Executive, Centre for Economics and Business Research (Cebr) who was commissioned to produce the Index for LifeSearch, said: “The macroeconomic environment in 2022 so far has been characterised by volatility. This is particularly the case from the perspective of consumers, with the mounting inflation rate putting significant pressure on household budgets. As such, it is of little surprise to see households’ perceptions of their income and wealth weaken.
“Cebr expects the inflation rate to accelerate further over the coming months, driven by energy prices, transport costs, and other consumer essentials. This will put further downward pressure on real spending power, meaning the outlook for household finances remains unfavourable.”
Debbie Kennedy added: “It’s hardly surprising that Brits are concerned about their finances in the current climate as many are having to face the unthinkable choice of food on the table over heating their home, and this is in part one of the reasons that happiness levels are at a record low in the Index. With so much uncertainty still, it has never been more important for consumers to protect themselves and their families - the right protection can give peace of mind from any future financial shocks that may impact their income such as sickness, injury or death.”
