Research highlights impact of global economic uncertainty on society’s vulnerable

New research conducted by the University of Salford and Seattle Pacific University in partnership with Data on Demand, has uncovered the true impact of recent unprecedented global events on society’s most vulnerable people. The data highlights that the pandemic, the war in Ukraine, and the cost-of-living crisis have resulted in the proportion of UK consumer loan applicants seeking subprime loans to cover day-to-day living costs rising significantly from 12% to 32%.

The findings, which comprise analysis of over 20 million subprime consumer loan applications made by over 2.7 million individuals between 2020 and 2024, revealed around a quarter of the sample engaged in repeat applications to cover recurring household bills and costs. Subprime borrowers are those with a poor/no credit history at all and are typically considered high risk. 

Furthermore, the vast majority of applicants typically apply for lower amounts of around £1,000 to cover unexpected expenses (20%), bills (15%) and home improvements (12%). The data also revealed the typical loan applicant is male, on average below 40 years of age, in employment and in rented accommodation, with an average annual income of around £22,000.

Dr Pål Vik, Senior Research Fellow at the University of Salford’s Business School, commented: “The results of our analysis point to a deterioration in the financial circumstances of subprime borrowers due to the cost-of-living crisis. These consumers are to a greater extent seeking financing to cover day-to-day living expenses. Those with limited recourse to the welfare system, namely young people without dependents, and those classed as vulnerable are significantly more likely to submit multiple loan applications to cover recurring household bills. This is concerning as we know that this form of behaviour is associated with negative consumer outcomes.”

Dr Geri Mason, Associate Professor of Economics at Seattle Pacific University, added: “It is particularly concerning to see that the youngest cohort (18-24 yr olds) are not setting themselves up for financial health at such an early age. It is important to consider that there is a broad segment of young, working individuals without dependents that are, in the absence of access to social support programs, using the subprime market to supplement regular budgetary expenses and smooth their consumption patterns.”

The collaborative research project provides insight on the reality of how these challenges have impacted UK consumers financially, particularly those in vulnerable circumstances with limited access to mainstream credit. The focus of the analysis includes, profile of the typical subprime consumer, changing behavioural characteristics, consumer needs and borrowing purposes, and emerging vulnerability trends.

The findings are based on Data on Demand’s database, which is estimated to cover approximately 60% of the subprime consumer loan market.

Pål concluded: “The research finds that those most likely to engage in repeat applications to cover day-to-day living costs are vulnerable, young people, on low incomes, those who have had their hours or income reduced, and those with high costs relative to their expenses. Repeat borrowing to cover recurring costs risks further deterioration of their already difficult financial circumstances.”