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Failing consumer markets undermine government attempts to improve household finances

23 Medi 2016

People losing £23bn a year - an average of £446 per person - as consumer markets fail

Key government attempts to improve household finances such as increasing the income tax threshold and raising wages are being undermined by companies who let down consumers and rip people off, according to a major new report.

Citizens Advice today lifts the lid on the cost of consumer detriment in the UK - showing that people are losing on average almost the equivalent of a week’s pay for an average worker on shoddy services, faulty products and delayed deliveries.

While there's been a lot of public debate about improving people’s incomes through wages and taxes, there has been less talk about the consumer problems that hit people's money when they spend.

With consumers losing so much money due to shoddy products and services, government changes like increasing income tax thresholds or wages, can have less impact on household finances.

The report finds:

  • People are losing £23bn a year due to consumer market failures - which is an average of £446 per person per year.  There is huge variance in the average loss per person - it ranges from a large proportion of people whose average losses have been under £100 in markets such as telecoms, to a relatively smaller but still significant group who lost substantially more in areas like construction.

  • People spend an average of 22.5 hours a year - including six hours of work time - trying to clear up consumer problems.  Similarly this ranges from a large proportion of people who were able to resolve their problems very quickly to those who spent days trying to resolve a single issue.

  • 55% of consumers do not push for compensation, often because they find the process too complicated or do not think they will be compensated.

The charity says it is pleased new Prime Minister Theresa May has already identified that companies let consumers down and that she wants to strike a better deal for people.

Gillian Guy, Chief Executive of Citizens Advice, said:

“People are paying through the nose for the mistakes and failures of businesses.

“Consumer markets are a vital pillar of the UK economy - but at the moment there are some companies who are ripping off consumers and undercutting businesses that do the right thing.

“As well as hammering household finances, failing consumer markets hit essential parts of people’s lives that they rely on - like energy supply, transport, banking and insurance.

“It’s good the Prime Minister is keen to help working people who are struggling and wants to push consumer affairs further up the political agenda.  A fresh look at how businesses are failing consumers could mean people benefit more from changes to tax and wages.”

The figures, based on interviews with more than 1600 people, says the worst-offending sectors by number of problems are:

  • TV, phone and internet (27.6m);

  • Train services (9.6m);

  • Energy (8.9m);

  • Electrical appliances (6.4m);

  • Bus services (6.1m);

  • Catering such as restaurants and bars (5.1m);

  • Construction (4.8m).  

Problems with TV, phone and internet - such as poor reception, higher than expected bills or difficulties ending a contract - are the most costly to consumers at £4.2bn per year. Issues with professional services, like lawyers and accountants, cost £4.1 billion, £3.5bn was wasted on construction, £2.6bn on home maintenance such as decorators, £2.6bn on property services like letting agents and £1.2bn on pension and investment services.

Of the total £23bn more than £10bn is wasted because of poor quality service, £3.2bn on failure to provide an item or service, £2.6bn of problems with prices charged and £1.3bn on poor quality goods.

The introduction of the Consumer Rights Act 2015 has helped to bring coherence to consumer legislation, Citizens Advice adds. The Consumer Protection Partnership has also been good at bringing enforcers and other consumers bodies under one roof to pinpoint and act on problems that need to be solved.

The Consumer Detriment: Counting the Cost of Consumer Problems report measured the loss to consumers by calculating money they directly lose and adding the impact of lost time.

Citizens Advice helps millions of consumers every year through its local network, national phone service and via online support. One 81-year-old man who came to the charity was contacted by bailiffs acting for his energy supplier who demanded he pay them £800 - when in fact the company owed him money. Another couple’s broadband connection cut out every 10 minutes over a three month period - it was not until they lost patience and emailed the CEO of the firm directly that engineers were sent to fix it.

Graduates reported five times as many consumer issues as non-graduates. While young people reported a higher number of problems on average, people aged 35 to 54 suffered a bigger financial loss - mainly due to higher levels of lost earnings. This age group also reclaimed the lowest level of compensation.

The report also finds that 60% of the overall 1.2bn hours wasted trying to resolve consumers problems was lost leisure time, with 40% work time.

Citizens Advice fears today’s numbers may only be the tip of the iceberg with people also losing out on scams that go undetected and by not regularly switching suppliers on services like energy and telecoms.

Notes to editors

  1. This research was undertaken by Oxford Economics, based on 1,613 face-to-face interviews conducted by Ipsos MORI across Great Britain in February and March 2016. The results were scaled up to make them representative of the UK.
  2. Average regular weekly pay for an employee in Great Britain is £476 according to latest ONS figures.
  3. The £446 figure relates to all working age adults.
  4. In 2017 to 2018 the increase in the personal allowance tax threshold (from £11,000 to £11,500) will give typical basic rate taxpayers a gain of £100.
  5. The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
  6. The advice provided by the Citizens Advice service is free, independent, confidential and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
  7. To get advice online or find your local Citizens Advice in England and Wales, visit citizensadvice.org.uk
  8. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.
  9. Local Citizens Advice in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full service statistics see our publication Advice trends.
  10. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.