More than 18,000 new clients completed full debt advice with StepChange Debt Charity in January 2023, which is a 22% increase from any single month in 2022.
This indicates that more people are facing financial difficulty in the new year due to rising living costs.
According to the Bank of England’s Money and Credit data for January, consumers borrowed an additional £1.6bn in consumer credit, on net, compared to the £0.8bn borrowed in December.
Although StepChange has always observed a seasonal rise in client volumes in January, this year’s increase is significantly higher than previous years.
In January 2023, the number of clients advised increased by 77% compared to the previous month. This is a 48% increase from December 2021 to January 2022.
The charity also noted an increase in the proportion of new clients citing the cost of living as their main reason for debt. The number rose to 24%, the highest it has been and almost three times what it was in January 2022 (9%).
Furthermore, for the first time in several months, the proportion of clients with unsecured debts such as credit cards has increased.
The percentage of clients with credit card debt increased from 63% to 67% between December 2022 and January 2023.
In addition, the proportion of clients with personal loan debt increased by two-percentage points, standing at almost half (46%). However, these figures remain slightly lower than those in January 2022.
StepChange also observed that 65% of new clients advised in January 2023 were women, up from 62% in December 2022.
Richard Lane, director of external affairs at StepChange Debt Charity, highlighted the concerning demand for debt advice and suggested that the proposed rise in the energy price cap should be scrapped to protect those at risk of falling into severe financial difficulty.
Additionally, unaffordable deductions from benefits to repay debts should be ended. Lane also called for the £1bn Household Support Grant to be made permanent to provide an effective system of local crisis support for households facing financial difficulty.
Lane believes that although inflation may decrease later this year, unforeseeable external factors affecting the economy and people’s finances can cause unpredictable results.
Therefore, a robust system is necessary to protect financially vulnerable households from falling into problem debt due to circumstances beyond their control.
