THREE areas of Glasgow top the list of the most financially vulnerable areas of Scotland, according to a new analysis.

Large parts of Central Scotland, Dumfries and Galloway, the Borders, Perthshire, Angus and Dundee have also been classed as “medium” risk over the ability of households to manage daily finances and resist economic shocks.

The new report, compiled by credit management services company Lowell, compiled a financial vulnerability index (FVI) with scores out of 100 using six measures, including defaulting on debt, using “alternative” finance such as payday loans or pawnbrokers, claiming work-related benefits, lacking emergency savings, having a high-cost loan and relying heavily on credit.

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Glasgow East recorded the highest score at 51.4, followed closely behind by Glasgow North East at 51.2 and Glasgow South West at 50.3.

That compares to an average of 41.7 across the whole of Scotland, which is better than the 43.1 rating for the UK.

Scotland experienced the biggest improvement in financial health in the UK between the last three months of 2021 and the second quarter (Q2) of this year, according to the report.

But it also noted: “Overall financial vulnerability [in Scotland] was at 41.7 at the end of Q2 2022, 1.4 points lower than the UK average. This is likely due to the 2.7-point drop in consumer defaults, while the UK remained the same. At the same time, credit allowance use in Scotland overtook the UK in Q4 2021 and was 1.9 points higher in Q2 2022.”

John Pears (pictured), UK CEO at Lowell, said: “On paper it might look like Scotland is faring better than the rest of the UK, but we’re seeing an uptick in credit usage which means people are having to borrow extra money. The cost of living is increasing across the board and with budgets being stretched to their limit, people are turning to credit more and more.”

He added: “For many now, a single income shock can be enough to push a household into problem debt.

People need help to reduce costs.

“The new government needs to take action to ensure households, especially the lowest incomes, get the support they need.”

Peter Kelly, director of the Poverty Alliance, said: “In a wealthy country like ours, it’s completely unjust that more and more people are struggling to keep their heads above water, trapped in a rising tide of poverty and financial insecurity.

“The present crisis is the latest example of a decades-long injustice, where wages have been pushed down and our social security has been deliberately and repeatedly cut.

People just can’t cope with massive price hikes.”

He added: “It doesn’t have to be like this. We can redesign our economy and rebuild and renew our social security so that everyone has an income that allows them to live in dignity and security. All it takes is the political will to do it.”

The analysis found credit use in the second of quarter of this year across the UK was the highest it has been since the early month of the pandemic, with households said to be resorting to borrowing to meet increasing food and energy bills.

It also highlights that financial vulnerability “varies significantly” across the UK, with many areas that have historically relied on heavy industrial manufacturing, such as the North East, in a consistently worse position from 2017 through to 2020.

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A rapid increase in financial hardship in some areas of London was also seen during the onset of the Covid pandemic, which the report noted may be due to the number of workers in the city relying on service jobs.

“The FVI reveals that UK household financial vulnerability was relatively stable in the period after Brexit Article 50 triggered, increased as Brexit negotiations and press coverage continued, and accelerated dramatically when the Covid-19 pandemic started,” the report said.

“Future research could disentangle the causes of the increase in financial distress among households in the UK.

“For example, the results presented in this brief cannot tell us whether financial vulnerability caused Brexit, vice versa, or if other underlying trends or UK policies are driving the changes we observe.”