Inflation: Warning eight million struggling to keep up with bills

Almost eight million people are struggling to pay their bills as living costs surge, a watchdog has warned.

The Financial Conduct Authority (FCA) estimated that 7.8 million people in the UK currently find bills a "heavy burden", up from 5.3 million in 2020.

Energy, food and fuel prices have risen sharply in the last six months in part because of the Ukraine war.

Inflation - the rate at which prices rise - increased to 10.1% last month, returning to a 40-year high.

Nicole from Gainsborough works for a university, but because of her concerns around energy bills, she often wears a blanket around her shoulders when she's working from home.

"I consider my salary to be fairly good and I work full-time, yet I'm worried about putting the heating on, using the tumble dryer, or the oven to cook," she told BBC News.

Nicole avoids putting the heating on

She has taken measures at home to try to keep costs down, like installing a smart meter.

But another worry is that the fixed-rate mortgage she has with her husband will be coming to an end in 12 months, and rates have risen sharply.

"I have no idea how we will afford it," Nicole said. "I fully appreciate there are people in a much worse position than us... but we're in a totally unexpected situation as two normal people with normal incomes, who work hard."

The FCA, which regulates UK businesses, surveyed 19,000 people between February and June and found:

• One in four adults described themselves as being financially vulnerable, meaning they would quickly find themselves in difficultly if they suffered a financial shock

• Some 4.2 million people had missed bills or loan repayments in at least three of the six months before the survey took place

• 27% of black respondents said they found it a heavy burden to keep up with bills, compared with around 15% of UK adults generally.

'Struggling to keep up'

Sheldon Mills, executive director of consumer and competition at the FCA, said the watchdog had urged firms to work with customers struggling to make payments.

It is also reminding people to contact their energy provider if they cannot afford their bills, to shop around to find the best deal, and to look online for free, expert debt advice.

Energy bills rose sharply in October when the energy price cap - which limits what providers can charge for a unit of energy - increased.

The government has since limited unit prices for at least six months to protect consumers, but millions are still likely to struggle this winter.

Food prices are also surging due to disruption caused by the war in Ukraine and the weak pound, which drives up import costs.

UK food prices jumped 14.6% in the year to September - the biggest annual rise since 1980 - with the cost of key goods like fruit, milk, cereal and sugar all climbing.

This is just the first taste of what's to come from this survey when the full report is published next year, but it's significant for a couple of reasons.

Firstly because it's a big one. More than 19,000 randomly selected households were sent the survey to fill in, which is a much bigger sample size than most organisations work from.

Secondly, because this survey was done through the spring of this year, which was before the latest energy price rises kicked in, and the recent spikes in food and fuel prices. If this many households were already finding it difficult at that point of the year, you can imagine that the picture has gotten significantly worse since then. The regulator is flagging up particularly concerns for the North of England and Wales compared with the South East of England, as well as among black respondents compared to the population as a whole.

The FCA is keen to stress that it is taking action, by beginning to engage with Buy Now Pay Later firms, and reminding other lenders of their duty to protect customers. But those moves look like small-fry when held against the scale and depth of financial difficulties many respondents within their own survey now say they are facing.

• BBC experts on six things you can do as cost of living rises

• 'It used to be homeless people, now it's working people'

• Try our Family £1 recipe meal plan

• Why are prices rising so much?

• Are you setting up a warm bank? We want your stories