Cost of living crisis in Manchester: which areas are struggling most as more households fall into debt

The latest figures in the Financial Vulnerability Index show Greater Manchester is becoming more resilient but a think tank warns there are still issues.

The financial health of Greater Manchester is improving according to new data but the think tank behind the figures has warned against thinking that means the city-region is out of the woods when it comes to money matters and the cost of living crisis.

The latest Financial Vulnerability Index, which uses half a dozen measures to work out how resilient constituencies across the country are when it comes to money, shows an improving picture both in Greater Manchester and across the country.

However, the authors of the study warn there are major disparities in how well places are faring. And there are still issues, particularly around people falling into debt as they continue to borrow to help cope with rising costs and how many people are in default on money they owe.

The Government has said it recognises the pressure currently on household budgets and has outlined the support for people it is providing.

What does the latest Financial Vulnerability Index show for Greater Manchester?

The Financial Vulnerability Index has been created by debt collection company Lowell and the US-based think tank the Urban Institute. It is based on six components that capture a household’s ability to manage daily finances and resist economic shocks: carrying debt in default, using alternative financial products such as payday loans, claiming work-related benefits, lacking emergency savings, holding a high-cost loan and relying heavily on credit.

Each constituency is given a score from one to 100. The higher the number, the greater the level of financial vulnerability residents in that constituency are experiencing.

Analysis of the index by the data team at NationalWorld shows that in Greater Manchester, as in the UK as a whole, financial vulnerability has by and large gone down between the second quarter of last year and the fourth and final one.

New data has shown how financially vulnerable communities across Greater Manchester are. Photo: AdobeStock
New data has shown how financially vulnerable communities across Greater Manchester are. Photo: AdobeStock
New data has shown how financially vulnerable communities across Greater Manchester are. Photo: AdobeStock

The city-region as a whole had a score of 52.4 in Q2 in 2022, and this declined by 2.3 points to 50.1 by Q4.

In Manchester itself the highest level of vulnerability was in the Gorton constituency, which saw a fall of 2.9 points from 58.1 to 55.2, while Withington had a 3.1-point fall from 48.3 to 45.2. In Manchester Central there was a reduction of 1.7 points, from 53.3 to 51.7.

Across Greater Manchester constituencies also have relatively high levels of financial vulnerability with scores in the 40s and 50s in the index, even though the trend between Q2 and Q4 is downwards.

Rochdale had a 1.8 point decline in financial vulnerability from 56.1 to 54.3, while there was a drop of 2.4 points in Salford and Eccles, from 53.5 to 51.4.

Financial vulnerability in Stockport declined 2.4 points from 52.3 to 49.9, while Oldham East and Saddleworth saw a drop of 2.2 points from 54.9 to 52.7. Neighbouring Oldham West and Royton, meanwhile, saw a 1.5 point decline from 55.7 to 54.2. The most financially vulnerable of Bolton’s three constituencies, Bolton South East, experienced a 1.6 point drop in vulnerability from 56 to 54.4 across the quarters.

What has been said about the latest Financial Vulnerability Index data?

Although the latest index appears to be showing good news with financial resilience increasing in the city-region, the team behind the study has cautioned against too much celebration.

John Pears,UK CEO at Lowell, said: “What this new data shows us is a complex picture of financial health in the UK. Overall it might be getting better, but we’re still miles away from where we were before the pandemic. Dive a little deeper and we can see a range of issues  bubbling under the surface.

“The decline in overall financial vulnerability is important, but it’s still high. Default rates are rising. We need to think about what we’re doing, at an industry and government level, to improve the country’s financial health over the long term.”

Researchers have warned that less affluent urban areas are in particular danger of being left behind and experiencing higher levels of financial vulnerability.

What has the Government said in response?

A spokesperson for the Department for Work and Pensions said: “We recognise the pressures of the rising cost of living, which is why we delivered £1,200 of direct support to millions of households last year, including £400 towards energy costs, and will be providing a further £1,350 of support to the most vulnerable households in 2023-24.

“Our Energy Price Guarantee is also saving the typical household another £900 this winter and we are increasing benefits in line with inflation at 10.1% from April, while our Household Support Fund is helping people in England with essential costs.

“Those in debt may be able to access the ‘Breathing Space’ scheme, which gives them time to organise debt advice and solutions, while the government-sponsored MoneyHelper service has information about debt management and free debt advisory support.”

A spokesperson for the Treasury added: "The best thing we can do to help families is to stick to the plan to halve inflation this year. This week at the Budget, the Chancellor will set out the next stage in our plan to bear down on inflation, reduce debt and grow the economy."