THE HEART OF WORKING BRITAIN: FINANCIAL LIFE FOR WORKERS EARNING UP TO £40K A YEAR

A new report analysing the real cost of living for workers earning up to £40,000 a year reveals unique insights into the growing financial pressures on this critical segment of the workforce. These workers form the backbone of the economy, and their financial stability has broad implications for consumer demand, financial resilience, and the wider economy.

The report is based on actual transactional data from 1,151 consumers, offering a comprehensive and accurate view of their real-world financial behaviour across essential and discretionary spending categories.

Key Findings:

• Two-Year overview: Incomes rose by 16.7%, while expenses (e.g. bills and spending) increased by 22.0%, narrowing the financial buffer to just 1.3% (i.e. workers earning up to £40,000 are just about managing to stay ahead of their outgoings) and underscoring the impact of rising living costs.
• One-Year comparison: Income grew by 6.4%, but expenses rose by 9.9%, resulting in a slim 0.8% difference between income and expenses—an indication of how higher expenses are challenging workers' ability to save.
• Quarter-on-Quarter: A -2.8% quarterly deficit emerged as income dipped slightly by 0.6%, while expenses increased by 4.4%. This deficit highlights an increased reliance on cost-cutting as financial buffers dwindle.

Despite growing expenses, workers have shown remarkable adaptability, maintaining a small surplus over the past year, though challenges remain.

Additional data from a Mintel survey reveals the human impact behind these figures:

Only 2% of households earning less than £40,000 feel that the cost-of-living crisis is no longer a problem.

• 40% of this group will take on additional work to make ends meet.
• 42% report that financial strain has negatively impacted their mental wellbeing.
• 34% say their physical health has also been affected.

Ian McLaughlin, CEO of Vanquis Banking Group, commented: “Despite rising costs, many hard-working individuals are managing to keep a small financial surplus. Modest year-on-year income growth supports stability, and even in challenging times workers continue to adapt resiliently to evolving economic conditions.”

The Vanquis Financial Wellbeing Index, grounded in real life transactional data, offers timely insight into the financial challenges faced by those earning up to £40,000 a year. By tracking real spending behaviour and the impact of household bills, the findings shed light on the financial realities faced by this group as living costs rise.

How workers earning up to £40k a year spend their money:

The full Vanquis Financial Wellbeing Index summarises how workers earning up to £40k a year spend their money. Over the past two years, consumer spending on experiences and entertainment has remained stable, although recent quarterly dips across multiple categories signal a tightening of discretionary spending.

Sectors like coffee and bakery are thriving, indicating continued spending on everyday treats. In contrast, bars and pubs have seen no growth over two years, reflecting a decline in discretionary social spending. Mid-tier restaurants show modest growth but are facing recent declines as consumers tighten their belts when dining out. Overall, consumers in this category are increasingly prioritising value-driven choices in their spending habits.

Vanquis will continue tracking the evolving financial resilience of workers earning up to £40,000, with the next Financial Wellbeing Index, set for release in February 2025, providing a close look into the ongoing trends shaping the financial lives at the Heart of Working Britain.

Read the Vanquis Financial Wellbeing Index here.