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Is Britain heading for a long comedown from the cost of living crisis?


Employees’ reliance on cheap credit risks stalling Britain’s economic recovery

  • Data from Barnett Waddingham shows more than a third (38%) of employees are relying on Buy Now, Pay Later services to mitigate rising costs
  • An additional three in ten (30%) have increased their use of credit cards, as others resort to risky bank loans and payday loans
  • Legacy of cost-of-living crisis could have far-reaching consequences for UK workers saddled with long-term financial vulnerabilities
  • Research shows a need for employers to review remuneration and benefits packages to protect the financial resilience of employees

Britain could be heading for a prolonged “Cost of Living Comedown” after many workers turned to credit to keep their heads above water during the cost-of-living crisis and with more intending to follow suit this year – according to new research into employee wellbeing from professional services consultancy, Barnett Waddingham.

The survey of more than 3,000 UK employees reveals that more than a third of workers have used credit including Buy Now, Pay Later, credit cards, bank loans and payday loans to provide their finances with a short term boost in lean times.  Relying on these products, which typically have very high APRs, is extremely risky – particularly in an environment where interest rates are on the rise and could leave many unable to service their debt, as well as impacting their long term financial resilience. 

Buy Now, Pay Later is the most used credit service by far, with almost two in five employees (38%) using this, and a further 15% planning to use it in future – suggesting employees are increasingly looking at ways to make their salary go further. Looking at other forms of credit, almost a third (30%) have increased their used of credit cards, over one in seven (17%) have taken out a bank loan, while one in ten (12%) have resorted to payday loans. 

This cheap credit surge could take a long term toll on the UK’s economic recovery, delaying a return to confidence as increasingly vulnerable consumers struggle with mounting debts at a time of low wage growth.  The FCA’s latest Financial Lives Survey[1] undertaken in October 2022 suggests that 47% of consumers currently have at least one form of vulnerability – a rise from 46% in its 2020 report.  If this trend continues many more people will struggle to absorb financial shocks and will be left unable to prepare adequately for their own financial futures.

Disturbingly, the study reveals that some have already been forced to consider last resort means to keep afloat. More than one in ten already claims to use a foodbank (11%) and 16% said they may need to use one this year. Almost one in ten (9%) also admitted to having spoken with a money charity in the last 12 months, while 17% plan to ask a mental health charity for help.  While among other respondents (16%) are considering cashing in their investments and a similar number will draw down their pension to make ends meet.

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With many UK employees now turning to their employers for guidance and support, the spotlight will be on businesses to review the support they provide to workers, or they could face an increasingly disengaged, financially vulnerable workforce.


Thinking about the last 12 months, which of the following actions, if any, have you done or now plan to do?   I have done this I have not done this but I plan to I have not done this, nor do I plan to    
Spent less money 64% 23% 12%    
Dedicated time to re-budgeting my finances 46% 29% 26%    
Started saving more 40% 36% 24%    
Used buy now, pay later services 38% 15% 47%    
Looked into whether there are any state benefits that I am eligible for 32% 19% 49%    
Increased my use of credit cards 30% 15% 55%    
Asked family and friends for financial support 26% 16% 58%    
Taken out a bank loan 17% 15% 68%    
Cashed in my investments 14% 16% 70%    
Asked a mental health charity for help 13% 17% 70%    
Taken out a payday loan 12% 13% 74%    
Started using a food bank 12% 16% 72%    
Drawn down my pension 10% 16% 75%    
Asked a money charity for help 9% 15% 76%    


Julia Turney, Partner and Head of Platform & Benefits, Barnett Waddingham, said: “Despite inflation having now slightly eased following its all-time-high in October, there are precious few green shoots of recovery emerging so far this Spring. With wage-growth seeing minimal rises in recent months, we’re now worryingly seeing the increase of a ‘financially vulnerable’ workforce as people’s salaries aren’t meeting their monthly outgoings. Its clear people are closely watching their budgets, but if nothing changes soon, our data shows a growing number of employees will be turning to debt, if they haven’t already.

“While there is a role for credit as part of a healthy financial plan, it is never the answer to a personal debt crisis. Not only could this risk an employee’s future financial resilience, but it could fuel a ‘Cost of Living Comedown’ nationally, stunting consumer confidence and holding back the economic recovery.

“In this environment, it will be vital for employers to play an active role in supporting workers, taking time to understand the financial vulnerabilities they are facing outside of the office. Beyond financial support, this will mean opening a dialogue with employees, and building a benefits plan that encompasses their needs at its core.”


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