Multiple recent figures underline the scale of financial pressures building on UK households throughout 2020 from the economic impact of the Covid-19 pandemic, according to the November 2020 Money Statistics, produced by The Money Charity.
With the end of this most unusual year in sight, details continue to emerge of the scale of damage which the Coronavirus crisis has had on the UK’s finances. Through 2020, 30.4% of UK households have experienced an income reduction, while 5.6 million people have fallen into arrears or borrowed to make ends meet. 700,000 are now reported to be in rental arrears, with half of those having been served an eviction notice or spoken to about eviction by their landlord.
While financial damage can be seen across multiple income groups, the indications are that financial distress is being felt most particularly by particular sets of people, such as young people, single and couple parents, people from minority ethnic groups, social and private renters, and those on low incomes. The self-employed have also been heavily affected.
These challenges to income levels sit alongside a weakening UK labour market, adding extra financial pressures, with the number of unemployed people increasing by 243,000 in the three months to September while 314,000 people were made redundant in the same period. Looking specifically at younger people, between February and September 2020, the number of 18-24 year-olds in employment fell by 231,000 while 512,000 were unemployed between July and September, 13.6% of the total in this age group.
These unemployment increases occurred despite the furlough scheme, which has enabled millions to retain their jobs during the crisis. Weighing all these factors together therefore suggests a serious risk of a household insolvency crisis coming in 2021 when various financial relief measures end or ease off.
Michelle Highman, Chief Executive of The Money Charity says: “Our vision is to see the UK increase its financial wellbeing and a key part of that is helping people develop the skills, knowledge and confidence to manage their money through good and bad. Having a considered, robust financial plan will enable people to find their way through not just the everyday but also the unanticipated. Clearly this year’s events have proved an enormous, unexpected challenge to that goal and this month’s figures point to further looming concerns.
“There is a definite suggestion of a significant household insolvency crisis coming in 2021 and our call is therefore for a new and imaginative package which will address and reduce unemployment, help people cope with higher debt while paying for essentials, keep their houses and avoid eviction from rented homes.”
Other striking numbers from the November Money Statistics:
- Outstanding credit card balances fell by 1% in the year to September 2020. (P5.)
- It costs an average of £23.25 per day for a couple to raise a child from birth to the age of 18. (P14.)
- For a lone parent family, the cost of raising a child comes to £28.22 per day. (P14.)