Rise in number of UK workers turning to high-cost short term loans

The number of UK workers turning to high-cost short term loans (payday loans) as they struggle to cover their living costs and make ends meet continues to rise. Using data collected from over 700,000 payday loans requested between January 2017 and December  2018, credit broker CashLady has gathered together an in-depth analysis of the average borrower.

What stands out from the data is that many of those requesting payday loans work in the retail sector. This does not come as too much of a surprise as it is an industry that has a longstanding reputation for low pay and lack of job progression.

According to research conducted in 2018, median pay for workers between the ages of 18 to 29 in the retail sector is £8.42. This is lower than the median wage for those in the same age group employed in other industries (£9.88). When all age groups are factored in, it is some way lower than the media pay for the entire UK, which is (£12.18).

Cash Lady’s high-cost credit market analysis highlights how brands such as Tesco, Asda, Sainsbury’s, McDonald’s and Morrisons continue to appear high up on the list. In both 2017 and 2018, these five giant retailers were responsible for employing the highest percentage of staff who requested payday loans.

What also stands out is the amount of payday loan applications that came from those living at home. This further supports the suggestion that young staff working in retail are likely to receive lower wages.

In fact, the number of applications for those with this type of residential status increased by just over 2% between January 2017 and December 2018. 29.85% of applicants were living at home in 2017 before this increased to 31.87% over the next 12 months.

While it is difficult to draw solid conclusions from top-line figures, there may be a correlation between a fall in applications from council tenants and private tenants, and arise from those living with family.

The figures show applications from council tenants dropped from 21.81% to 19.98% over a 24 month period. Meanwhile, 31.08% of applications came from private tenants in 2018, compared to 32.36% 12 months earlier. 

Staff working for public sector organisations are also just as likely to require additional financial assistance as those employed in the private sector. Over the past two years, the NHS has firmly remained the number one employer of staff applying for payday loans. During the same period, there has also been a steady increase from those working in the British army.

While the overall amount of overall payday loan applications has increased across the board, the average amount being requested has lowered. In 2017, the average loan request stood at £412. By the end of the following 12 months, this had fallen by just over 4% to £394.

The average housing expenditure of applicants also slightly increased during the same period. The figure stood at £241 in 2017 but moved up to £243 as 2018 came to a close.

Source: Credit Connect