• £6.4billion a year could be added to UK GDP by delivering three changes that improve financial inclusion
• Financial exclusion presents a barrier to mental and physical wellbeing, security and a person realising their full potential
• Financial stress costs the UK £10.3bn annually, reducing productivity through absenteeism, presenteeism, and unemployment; improving financial wellbeing could save £5.9bn
• Fair4All Finance calls for concerted action from government and industry to make the financial services sector more inclusive

£6.4bn per year could be added to the UK economy by improving financial inclusion, according to new economic modelling by WPI Economics, commissioned by Fair4All Finance.

The study examines the impact of financial exclusion across three specific scenarios (low productivity due to poor financial wellbeing, low levels of personal savings and the poverty premium on car insurance) and models the possible benefits to the UK economy if policies and measures were put in place to address these.

Its findings show that £5.9 billion could be raised annually from increased productivity and employment due to improved financial wellbeing. A further £110 million could be added to the economy from increased investment due to higher personal savings, and £368 million from increased employment levels if affordable car insurance was available to more consumers.

With over 20 million people living in financially vulnerable circumstances in the UK, these three scenarios only represent the tip of the iceberg in how greater financial inclusion can benefit the economy. We are calling for concerted action from government and industry to deliver a more inclusive financial services sector.

Better financial wellbeing creates a more productive working population

The UK loses £10.3 billion a year from absenteeism and presenteeism due to financial concerns impacting individuals in the workforce, according to a 2023 CEBR report.

Additional studies show financial stress increases a worker’s cognitive load, reducing capacity, and diminishing productivity. It comes to the fore in three ways: presenteeism, where a worker’s focus and task completion abilities are impacted; full absenteeism, which also stretches the wider workforce who need to cover for those struggling; and economic inactivity, if the worker leaves employment due to the impact of problem debt or financial difficulties and related negative health impacts.

Problem debt impacts 8 million people, poor financial resilience through lack of savings impacts 5.4 million people, and a credit barrier impacts 16 million people, which is negatively impacting the productivity of the UK workforce.

Governmental and industry measures to improve access to affordable credit and schemes to encourage savings would benefit individuals and the wider economy. Our research into the impact of community finance in Merseyside (with Central Liverpool, Enterprise, Liverpool Community, Lodge Lane and District, and Riverside credit unions) showed the increased availability of affordable credit led to over two thirds of respondents claiming a significant positive impact on their financial situation and over 80% reporting a positive effect on mental and physical health, and in turn their economic productivity.

Measures to address poor financial wellbeing would generate £3.1 billion from lessened presenteeism, £890 million from less absenteeism, and £2 billion from reduced unemployment – a total of £5.9 billion – for the UK economy.

Establishing better short term savings leads to long term investment

8.7 million people in the UK have less than £100 in savings, and many have less than required, which weakens their financial resilience and ability to build a safety net for the future. With less funds invested via savings accounts, it also limits the UK’s financial institutions’ overall investment capacity, increasing reliance on overseas investment.

Short-term savings lead to long-term savings. WPI Economics analysis shows only 21% of those with under £1,000 in short-term savings have any long-term savings, compared to 43% of people with short-term £1,000-5,000 in savings, and 62% with over £5,000.

Opt-out workplace savings schemes, building on the success of pension auto-enrolment, would boost short-term emergency cash savings levels for more than 10 million people. A scaled workplace savings scheme could increase short-term savings by £2.7 billion in the first year alone. This would generate an additional £180 million in long-term savings and bolster the UK’s ability to inwardly invest by an additional £96 million per year, which WPI Economics estimates is equivalent to £110 million of additional economic output.

Remove the poverty premium to make car insurance more affordable and inclusive

Car insurance premiums have risen by more than a third (34%) in just three years, from an average of £440 in Q4 2021, to £589 in Q1 2025, making it the largest insurance burden on a household.

The cost is compounded for low-income households, as less disposable income is coupled with higher costs – the ‘poverty premium’. Fair By Design research shows those living in deprived areas can be charged £314 more per year, which puts car ownership out of reach for many⁷.

25% of those prevented from driving due to insurance costs find it harder to look for work and 2.6 million are priced out of car insurance they’d need in order to commute to work. WPI Economics estimates that around 135,000 financially vulnerable people would benefit with a large number of these going on to gain employment, if the poverty premium was removed, marking a huge boost for labour market participation and the economy more broadly.

‘Financial vulnerability not only impacts people’s resilience, bit it also drags down the economy. Some of those most in need in our society feel disenfranchised, distracted, overlooked and often extremely stressed by their financial situation. This naturally impacts their ability to work productively, or at all in the most extreme cases. Our financial services industry doesn’t want to leave people behind, but currently this is the case. However, as an industry and a society, we can make quick changes that can start to address this.

This research and modelling explores three specific areas where targeted action by government and industry can improve millions of people’s lives and generate billions for the UK economy. Constructive action here could have an immediate impact, leading to a healthier, more productive and larger workforce as well as contributing to the Government’s overall growth ambitions.

Earlier this week the Chancellor Rachel Reeves, set out the Government’s plan to grow the financial services sector and support consumers to invest. It’s important to make sure everyone is able to benefit from growth in the sector and this starts with making products and services more inclusive and accessible. This will help struggling households and lead to growth in the real economy.

We are supporting the Government with the development of the upcoming National Financial Inclusion Strategy and look forward to seeing an ambitious strategy published later this year, which will make the financial services sector more inclusive and deliver better financial outcomes for everyone.’

Kate Pender, CEO, Fair4All Finance

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