TUC warns Brexit vote will increase financial pressures on households

Cash - Credit: PA

The Brexit vote is likely to increase financial pressures on households, according to a new report from the TUC.

The report warns that total unsecured debt for UK households (which excludes mortgage debt) rose by £48bn between 2012 and 2015 to reach £353bn.

The UK-wide trade union body found that 3.2m households, or 7.6m people, have to spend more than 25 per cent of their monthly income paying the interest on their debts, an increase of 700,000 or 28 per cent since 2012.

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It found that 1.2m low income households are estimated to be in “extreme problem debt”.

The TUC warned that, following the Brexit vote, the financial pressures on households are likely to increase as a consequence of sterling’s depreciation and the rising cost of imported goods and services.

Households could also face rising costs from rental housing, and in relation to childcare. If costs do rise, the trade unions report warns that many households with heavy debts will face a choice between cutting back on non-essential spending, defaulting on their debts, or somehow rescheduling their commitments.

It says: “If households reacted to increased debts by cutting back on spending this would add to risks to the economy given increased uncertainty from the Brexit vote and the forecasts for a substantial decline in investment spending”.

Prime Minister Theresa May has stated her intention to use her government to tackle inequality.

She added: “If you’re one of those families, if you’re just managing, I want to address you directly. I know you’re working around the clock, I know you’re doing your best, and I know that sometimes life can be a struggle. The government I lead will be driven not by the interests of the privileged few, but by yours.”

But Oxfam's Head of UK Programmes Rachael Orr called on the Government to do more to ensure employers pay workers enough to live on.

She said: “Wages are simply not keeping pace with the cost of living, putting an unfair burden on people who are struggling to put food on the table and pay essential bills.

“Too often having a job is not enough to keep families above the breadline - two thirds of children in poverty live in homes where at least one adult is working.”

The TUC report also found that many conventional measures may understate the scale of household debts and the burdens associated with repayment.