Unveiled - The changing financial face of Britain

Unveiled: The changing financial face of Britain

  • Young make biggest steps to manage their money
  • Families curb impulse spending

London, 9th June 2011 – a three year study by Experian® published today, reveals a seismic shift in financial attitudes and behaviours across the UK, following the longest recession in modern history.  The first comprehensive analysis of its kind undertaken in the UK since the beginning of the credit crunch provides a detailed insight into how the recent economic downturn has had major consequences on the way consumers approach personal finance.  Experian’s analysis shows that post-recession British consumers are hardened, more resilient and more financially savvy than ever before.  On average, UK consumers are now better able to manage their money, are increasingly credit smart and have cut down on impulsive spending, with the analysis revealing:

  • An increase in the number of consumers making their money last between paydays from 75% in 2008 to 81% today;
  • An increase in responsible borrowers with 88% of UK consumers considering their ability to pay back credit before they make impulsive purchases compared to 83% in 2008;
  • A fall in the number of people who are finding it a financial burden to keep up with bills and credit commitments from 16% pre recession to 12% post recession. 

However, there are indications of cash flow struggles amongst certain social groups, with increasing numbers of consumers revealing that they are more than £1000 overdrawn (16% in 2011 vs 14% in 2008).

Covering every household in the UK, the research is based on Experian’s latest version of its financial classification tool, Financial Strategy Segments 2011 (FSS) with additional insight from YouGov financial surveys undertaken between 2008 and 2011.  FSS is a unique people classification system which draws on over 300 data sources to divide the UK population into 14 main groups and 50 sub-types based on their attitudes to finance.

The young: increasingly credit smart  

Whilst Experian’s analysis reveals that younger groups (aged between 18 and 30) have a requirement for short term credit and continue to use it in their daily lives:

  • Young people are showing signs of becoming more efficient money managers with the percentage of individuals in this age group making their salaries last between paydays increasing from 63% pre recession to 77% in 2011.
  • Credit awareness has increased, with the number of people considering taking credit without thinking about their ability to pay it back falling from 23% in 2008 to 15% today.  This is most significant amongst the FSS 2011 classification of Young Essentials (young singles in their 20s on low incomes in rented accommodation making up 3.8% of the UK population), 18% of whom are now considering taking credit without thinking about the consequences compared to a third (33%) in August 2008. 
  • Bright Futures (FSS group of young professionals in their 20s and early 30s building their careers and accounting for 5.4% of households in the UK) have remained fairly consistent in their attitudes towards financial planning pre and post recession with 18% revealing they would buy on credit without thinking about their ability to pay it back in 2008 falling to 16% thinking the same today.   

Families: taking control of their finances

  • Families have been taking steps to manage their finances better and be more credit smart with only 14% buying on credit without thinking about it, compared to 18% before the recession.
  • However, the amount of families that rely on credit for everyday living has increased slightly to 14% from 12% in August 2008.
  • Consumers in the Balancing Budgets classification (middle years with average incomes and expenses) have been making the largest strides in managing their everyday finances with now only 10% struggling to last out until pay day (compared to 12% before the recession).
  • Individuals in the Growing Rewards category (high income families in their 30s and 40s with growing children accounting for nearly 6% of all UK households) are some of the few to have increased their reliance on overdrafts of over £1000 (33%) compared to just 15% in August 2008. However there is a high level of optimism in this group with nearly two thirds (61%) believing their financial situation will become better in the next 12 months.

Retirees:

Average annual household incomes for this group range from £16,000 to £46,000 and financial provisions at this stage of life vary greatly with clear divisions between the wealthy retired and those that have less money: 

  • In general, the last few years have seen retirees maintaining a stable financial situation and they are far more able than younger generations to keep up with all of their outgoings - less than 2% say they fall behind with bills and credit commitments.  They are also least likely to rely on an overdraft facility (76% do not have an overdraft facility compared to a national average of 56%).
  • People in this age bracket are also more able to make their income stretch from month to month – and this has further improved since the beginning of the economic crisis (an increase from 84% in 2008 to 87% now).  This may in part due to the fact that they have made a conscious effort to decrease reliance on credit (a fall from 8% to 5%) and have curbed their impulse shopping (a drop from 11% to 9%). 
  • Those in the Platinum Pensions social grouping (elderly people with good pensions accounting for 4.8% of UK households) have always been particularly good at limiting their impulse buying habits, but even this has now halved (2% vs 1%).

Nigel Wilson, Managing Director, Experian Marketing Information Services, UK and Ireland, comments: “Our study using Financial Strategy Segments reflects the unprecedented changes that have occurred in the UK economy over the past three years and shows how consumers appear to have adapted en masse.  The defining characteristic is greater personal finance acumen - whether that is making money last longer until the next pay day, through to thinking twice about ‘nice to have’ purchases.  Our latest version of Financial Strategy Segments means that companies can have an even clearer view of consumers’ underlying financial attitudes, lifestyles and behaviours which is crucial to improve customer engagement and reach.”

The 14 new groups and their key characteristics as identified by Experian are:

Group name

% of UK population

Prevalent location

Key characteristics 

Bright Futures

5.4%
  • Wandsworth
  • Hammersmith & Fulham
  • City of London

Young professionals, in their 20s and 30s building their careers.  Mainly single and on graduate salaries, many Bright Futures have overdrafts and few have savings. They use the Internet frequently and turn to family and friends for advice.

Single Endeavours

8.04%
  • Newham
  • Tower Hamlets
  • Hackney

Young singles and sharers working to establish themselves with low commitments.  Mainly aged in their 20s and early 30s, this group regularly uses overdrafts, have low financial commitments and a high internet and mobile phone use.

Young Essentials

3.76%
  • Manchester
  • Nottingham
  • Dundee City

Young people in their 20s on low income renting affordable accommodation. Young Essentials tend to struggle with bills and have a high mobile phone use.  

Growing Rewards

5.93%
  • Wokingham
  • Richmond-Upon-Thames
  • Hart

Families in their 30s and 40s, Growing Rewards benefit from two professional salaries. A high mortgage commitment is combined with a good savings account. An above average spend on insurance, this group also has life insurance and critical illness cover. They are regular users of the Internet.

Family Interest

4.74%
  • Blaby
  • Rushmoor
  • Stevenage

Growing families with mid range incomes and high expenses.  With young and school age children, Family Interest tend to live in semi-detached or terraced homes. They have an above average use of credit cards and like to balance transfers to new deals. They also have payment protection insurance, pet insurance and life insurance.

Accumulated Wealth

3.95%
  • Kensington & Chelsea
  • Elmbridge
  • South Bucks

Affluent families with high incomes, many assets and expensive homes.  Accumulated wealth have a range of investments including stocks and shares, equity ISAs as well as property as an investment. They spend on insurance products, invest into a pension and overall, have a sophisticated knowledge of personal finance issues.

Consolidating Assets

7.46%
  • Isles of Scilly
  • Wokingham
  • East Renfrewshire

Families in their middle years who have built a strong financial foundation, adding to savings regularly and an increasing amount of equity in their home. Many have above average salaries and provide support for older children.

Balancing Budgets

13.11%
  • Blackpool
  • Ashfield
  • Derry

Families in their middle years balancing expenses with average incomes.  Balancing Budgets tend to live in terraced and semi-detached housing on a repayment mortgage.  They have limited savings, and some have financial difficulties so are keen to find value for money.

Stretched Finances

7.41%
  • Manchester
  • Nottingham
  • Knowsley

Middle aged adults with limited incomes, Stretched Finances tend to have lower skilled jobs and are often in rented accommodation.  Many receive benefits.

Established Reserves

9.13%
  • Isles of Scilly
  • Ceredigion
  • Rochford

Aged in their late 50s / early 60s many are pre retirement households with good savings.  Trying to reduce financial commitments, many in this group have good levels of savings and own their homes outright.  Established Reserves are also likely to own Cash ISAs, premium bonds and pension plans.

Seasoned Economy

5.83%
  • Newham
  • Strabane
  • Cookstown

Pre retirement households who are experienced at making ends meet. Many rely on their own judgement when making financial decisions.

Platinum Pensions

4.79%
  • Isles of Scilly
  • Mole Valley
  • Chiltern

Retired singles and couples with good pensions.  This group tends to have high level of investments, own property outright and have a high disposable income.

Sunset Security

11.69%
  • Tendring
  • North Norfolk
  • West Somerset

Retired people with modest pensions and security of home ownership.  This group consists of cautious investors who like to make transactions face-to-face.

Traditional Thrift

8.77%
  • Blaenau Gwent
  • Merthyr Tydfil
  • Kingston Upon Hull

Elderly people on state pensions with low incomes.  Bills can be a struggle for this group and many don’t have savings.

 

ENDS

Contact:

Chantal Heckford / Jennifer Comerford / Duncan Skehens

Lansons Communications

020 7490 8828

chantalh@lansons.com / jenniferc@lansons.com / duncans@lansons.com

 

Methodology

Experian has combined the insight available from Financial Strategy Segments and extensive research from YouGov on the financial behaviour and attitudes of the UK population. For the purposes of this the following research surveys were appended with Financial Strategy Segments (FSS) and the results aggregated according to the FSS Group or Types assigned.

1 Financial Strategy Segments combined with YouGov quarterly Debt Tracker survey data (August 2008 to October 2010)

2 Financial Strategy Segments combined with YouGov monthly Household Economic Activity Tracker (April 2009 to November 2010)

3 Financial Strategy Segments combined with YouGov annual Financial Services Oracle (2009 to 2011)

About Financial Strategy Segments 2011

Financial Strategy Segments is a person and household level segmentation which provides an unrivalled depth of insight into the financial behaviours of UK consumers.  It classifies all adults in the United Kingdom into 14 household level groups (A–N) and 50 household level types (which are then further split into 93 person level types). Financial Strategy Segments has been built with the latest available data to reflect changes in behaviour during the economic downturn, supporting the targeting of products and services that are relevant to the consumer’s needs.  These are distinct financial lifestyle types which comprehensively describe the underlying factors which influence consumer behaviour, such as typical financial product holdings, behaviour and future intentions, as well as summarising their key socio-economic and demographic characteristics.

Sources of data used to describe individual financial circumstances include income, outstanding mortgage, unsecured debt, credit balances, investments and property assets. FSS also takes into account individual consumer attitudes towards financial products such as channel choice when researching, purchasing and managing personal financial products. It also includes people’s likely loyalty, switching behaviour and general attitudes towards credit. 

 

About Experian

Experian is the leading global information services company, providing data and analytical tools to clients in more than 80 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.

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 31 March 2011 was US$4.2 billion. Experian employs approximately 15,000 people in 41 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil. 


For more information, visit http://www.experianplc.com.

 

  • Contact Information

  • 2 Cumberland Place
    Fenian Street
    Dublin 2
    D02 HY05
    Ireland

Top