‘London Stalling’

While financial pressure is beginning to ease across much of the country, London is not sharing in the recovery. Households in London are:

• Using up their savings: London is the only major city where emergency savings are deteriorating. Nearly 57% of Londoners have no emergency savings and 36% report either reducing the amount they save or spending down their savings.

• Relying more on credit: London has seen the largest increase in credit usage of any major city as income struggles to keep pace with the cost of living. Almost one in four Londoners borrowed more or took out additional credit last year.

• Falling behind on repayments: Late arrears have increased more sharply in London than anywhere else. 

The research, based on a nationally representative survey of 8,000 people and anonymised customer data from more than 8 million customer accounts, was undertaken by Lowell and Opinium to explore the financial health of households across the UK as part of the Financial Vulnerability Index.

John Pears, UK CEO of Lowell, said:

“The past six years have been exceptionally tough for households, from the pandemic to successive global shocks and the knock-on impacts on the cost of living. It’s encouraging to see some early signs that financial pressure is beginning to ease in parts of the country.

“But this recovery is slow and uneven. Financial vulnerability is no longer confined to traditionally deprived areas but is becoming entrenched in places that were once seen as more resilient, including London. High housing costs, reliance on private renting and a changing labour market are putting sustained pressure on household finances in the capital.

“With another cost-of-living shock potentially looming, nearly half of households don’t have emergency savings and financial resilience remains fragile. Supporting households to rebuild buffers has to be a national priority or we risk undoing all this progress.”

Financial vulnerability shows signs of easing from recent highs

• Financial vulnerability fell to its lowest level since mid-2023.

• Benefits use has continued to decline from pandemic-era peaks (8.7%, down from 14.5% in Q3 2020).

• Fewer households are relying on alternative or high-cost financial products (9.8%, down from an all-time high of 11% at the start of 2025).

• There has been a modest improvement in savings, with a 2.4% fall in the share of households with little or no emergency buffer.

• However, vulnerability remains high by historical standards and progress has been uneven across the country.

UK average financial vulnerability

Britain’s most vulnerable cities improving fastest

• Areas hit hardest during the cost-of-living crisis, such as Birmingham, Leeds, Bradford and Middlesbrough, are now seeing the strongest improvements in financial resilience.

• Default rates are falling, suggesting fewer households are tipping into serious debt.

• Reliance on benefits has reduced, pointing to some stabilisation in incomes.

• There are early signs of improving savings, with a declining share of adults lacking any emergency buffer.

Structural barriers to financial recovery in London

• London’s labour market has a lower share of minimum wage workers than many other cities, meaning fewer households benefit directly from recent increases.

• Almost 3 in 10 Londoners rent privately, compared with around 1 in 5 or fewer in most other major cities. Fewer than half of London households own their own home vs. nearly 3 in 5 elsewhere.

• Average private rents in London are around £2,000 per month, compared with £650-£1,050 in other major cities, absorbing a far larger share of household income.

• 62% of Londoners are concerned about their ability to afford rent this year – the highest proportion anywhere in Britain.

Pressure spreading to traditionally resilient areas

• Many rural and semi-rural constituencies in southern England have seen little improvement, and in some cases worsening financial health.

• 43% of households in the South say their finances worsened in 2025

• 40% expect them to deteriorate further this year – the most pessimistic outlook of any region.

   

Young professionals increasingly squeezed

• Constituencies with high employment in white-collar sectors such as information and communications and professional services have been sharper declines in financial health.
• At the same time, areas with higher employment in hospitality, leisure and entertainment – sectors that employ many young people – have also experienced rising financial vulnerability.

Source: ONS, Business Register and Employment Survey, 2024 (via NOMIS)

The full report can be accessed here.