While the outlook for UK personal finances has improved over the past 12 months, millions of Brits are still struggling to pay their bills.

Figures from the Financial Conduct Authority (FCA) published on Wednesday reveal that 5.5 million people either fell behind on or missed one or more bills or credit repayments in the six months to January 2024.

However, the UK financial watchdog said that the number of people in financial difficulty had fallen from 10.9 million at the beginning of 2023, to 7.4 million in January of this year.

But the numbers were still higher than the 5.8 million recorded before the cost-of-living crisis began in 2021.

Renters, single parents, people from a minority ethnic background, and those living in the north east of England were most likely to be in financial difficulty.

“Our research shows many people are still struggling with their bills, though it is encouraging to see some benefitting from the help that’s available,” said Sheldon Mills, executive director of consumers and competition, FCA.

Data from the regulator found that last year 2.7 million people sought help from a lender, debt adviser or financial support charity, with nearly half of those in a better position as a result.

The BNPL problem

Andy Sleigh, chief operating office officer at ClearScore said that the FCA's findings don't take into account people who are unable to access regulated credit or financial support.

Research by the credit score provider suggests that the UK lending market for non-prime customers – those that have a lower income or credit score – has contracted by 34 per cent since 2019.

"This has pushed vulnerable people to unregulated lending, such as Buy Now, Pay Later (BNPL) or even illegal lenders, with major implications for their financial resilience and wellbeing," continued Sleigh. "This problem has gone ignored for too long."

The BNPL market is not currently regulated by the FCA, which means that firms offering these services are not required to make sure that BNPL products meet its rules, including checking that a customer can afford to repay the loan.

The regulator has said that it has reminded financial firms that they must support their customers and work with them to manage payment difficulties, adding that it has "cracked down" where firms haven’t met its expectations, including securing nearly £60 million in compensation for 270,000 customers.

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