Economic upheaval is putting a disproportionate strain on young adults and parents in the UK, according to the latest European Consumer Payment Report.
The annual European-wide survey of more than 24,000 consumers found that 36% experienced an income drop as a result of the Covid-19 crisis. Though 10% said their income has since gone back up to pre-crisis levels, a further 22% believe their income may soon decrease.
Young people and parents have been disproportionately affected, with more than half (54%) of 18-21-year olds and 50% of parents surveyed taking an income hit. In total, 60% of parents said they are more concerned about their financial wellbeing now than at any point in their lives – 37% of non-parents said the same.
“Our research shows the financial effects of the Covid-19 crisis are acute for particular groups. These vulnerable groups are those who have less financial flexibility anyway. For example, young adults often have fewer savings to fall back on, less disposable income and may be more likely to be made redundant. Parents have had to juggle childcare and home schooling with maintaining their income,” says Intrum’s UK Managing Director Eddie Nott.
The report found a gulf between those who are struggling and those whose incomes have not been affected by the Covid-19 crisis. One fifth of UK consumers (20%) said they needed to borrow money to pay bills in the last six months, and 77% of those people are borrowing every month to make ends meet – up from 53% in 2019.
Meanwhile, 78% of consumers said they are able to save money, with the majority (54%) maintaining their previous saving levels and 28% saving less. However, 18% have said they have been able to increase their savings.
“Many of those whose income has remained the same have found they are better off financially, with no commuting costs, reduced leisure expenditure and few travel opportunities,” says Nott.
Covid-19 has been a financial wake-up call for many. Almost half (48%) of those surveyed in the UK said they have realised their finances are not as secure as they need them to be and 49% said improving their financial literacy is now a top priority. Parents are especially affected – 61% said the crisis has made them realise their finances are less secure than they need to be to live a stress-free life.
In addition, there is caution about unnecessary borrowing: 55% are more wary than usual about taking on debt and 58% don’t want to borrow money to spend on major purchases until they are sure the crisis is over.
Consumers are also more aware of local businesses – 60% are more likely to support them after seeing the effect of Covid-19 and 65% said they are more aware about the negative impact of a sudden revenue drop. While a third (36%) said their spending is too small to make a difference, the majority (66%) are concerned about unemployment if they don’t support local firms.