‘Bill anxiety’ hits as consumers struggle to pay

Soaring prices and rising interest rates are creating a climate of ‘bill anxiety’ among Europe’s consumers, with confidence levels falling to a new low. That’s according to Intrum’s latest European Consumer Payment Report – an annual survey of 24,000 people across 24 European countries.

Almost six in ten Europeans (58 per cent) say rising bills are having a negative impact on their wellbeing, up from 45 per cent in 2021. Meanwhile, more than 80 per cent are worried about the impact of rising grocery prices on their ability to pay bills and save money over the next 12 months.

After years of low inflation and loose monetary policy, soaring prices and rising interest rates have made European consumers deeply pessimistic about the future. Many consumers who were relatively unaffected during the pandemic are now feeling the impact.

Risk of default rising

These cost shocks are increasing the risk of default on bills. One in three respondents to the survey said they will not have enough money to pay their utility bills in the next 12 months, while the same number say they have already missed a bill in the last year.

This figure rises to 53 per cent in Greece, 43 per cent in Romania, and around 40 per cent in Switzerland, Finland and Norway. And the overall European proportion rises to 43 per cent for those with poor financial education, suggesting that those with lower understanding may be less able to manage their money effectively.

Amongst those who expect to miss payments in the next 12 months, most say they are likely to default on lower-priority e-commerce and online store bills. This reflects consumers’ need to prioritise housing, food and energy costs.

Although a shortage of funds is the most common reason for default, it is worth noting that up to 10 per cent of consumers in some markets – including Germany, Austria and the UK – skipped payment because they thought the creditor would take no further action and that they would ‘get away with it’.

Changing behaviour

The stressful economic environment is leading consumers to change their spending behaviour. Six in ten say they are increasingly aware of the need to cut unnecessary costs.

A key area where people are cutting back is on meals out and socialising. This is bad news for the hospitality sector, which has already suffered through the Covid-19 pandemic. Younger consumers are particularly affected – they are more likely than older consumers to say that the downturn is undermining their social lives.

However, they are also more likely to say they are using buy-now/pay-later solutions to cover their growing costs – 31 per cent of the Gen Z cohort, those in their late teens and twenties, say they increasingly do this.

A feature of the current crisis is that it is affecting wealthier countries, as well as older consumers who were previously less impacted by the pandemic downturn. In the survey, 63 percent of consumers in France and the UK state they are worse off than they were last year, as are 62 per cent of the Gen X cohort (in their forties and fifties), compared with the European average of 59 per cent.

The situation is making many extremely pessimistic. Six in 10 consumers worry they won’t be able to retire comfortably (62%) and aren’t saving enough for the future (61%). This is up from 48% and 52% before the Covid crisis.

More than half of those surveyed expect inflation to continue for years, suggesting they have little faith in their leaders’ ability to bring prices under control. Three in ten are planning to ask for a pay rise to combat this – this rises to 41 per cent of those with young children.

Although we have not yet seen the ‘doom loop’ of a wage-price spiral in Europe, the relatively high share saying they will demand a pay increase indicates that consumers’ patience with the falling real wages is diminishing. This will put further spotlight on central banks’ capacity to curb inflation.

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These insights are based on the European Consumer Payment Report 2022. You can download the full report below.

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