A survey of customers by leading debt advice provider Financial Wellness Group has revealed how lockdown has impacted the finances of those already on a debt solution. Almost two thirds of respondents (64%) had experienced a drop in household income since the lockdown started.
The study shows the vital importance of the Government Job Retention Scheme: 38% of those that responded to the survey have been placed on furlough. It raises the concern about what will happen to people’s finances when furlough ends in October. Of those customers on furlough 15% work in hospitality, 14% in manufacturing and 13% in non-food retail.
The survey, which covered customers across the UK on either Debt Management Plans, IVAs, Trust Deeds or Debt Payment Plans under the Debt Arrangement Scheme, was completed by over 7,000 customers in early May.
Just 4% of customers reported that their role had already been made redundant, with those in the hospitality sector hardest hit (12%), followed by construction (10%) and administration/support (8%).
Customers were generally pessimistic about how long they think it would take for their income to recover once lockdown is lifted. Whilst one in five (21%) believe their income would return to normal with a month, 46% thought it could take up to three months, but 16% said it could take six months or more.
Not unexpectedly, two thirds (66%) of respondents said that they are spending less, either due to lockdown (24%) or because they’d made cutbacks (42%).
As a result, the vast majority of customers said that they were managing to stay up to date with priority bills. For example, 79% said they were up to date with their rent or mortgage, with 11% saying that they had taken a payment break. Similarly, 86% have stayed up to date with utilities with just 3% taking a payment break.
Unsurprisingly the crisis has taken its toll on customers’ wellbeing. Almost two thirds (65%) said that they had been worrying more about money and 74% said they’d generally been feeling more anxious.
Commenting on the results, Deborah Ware, chief operating officer of Financial Wellness Group said: “With our support, most of our customers have been able to manage their budgets to ensure that they remain on top of priority bills and, in most cases, continuing to pay into their debt solution. For those customers that have struggled, we’ve been here to support them to ensure that their budgets remain sustainable.
“Over a third of customers are on furlough and the extension of the scheme to October will be very welcome for them. However, if people aren’t able to return to work by then, the withdrawal of the scheme is going to trigger a significant wave of people looking for help with their debts.”