The cost of Covid
Exploring the impact of Coronavirus on household finances
When the Covid-19 outbreak first began over a year ago, few could have imagined the impact it would have on all our lives. The financial effects of he outbreak have been felt far from equally. Some people are in a healthier financial position now than before the pandemic. However, despite government support packages, many people have fallen behind losing jobs, income and livelihoods. At National Debtline and Business Debtline, we see the real-life experiences behind the headlines. Our new report, based on the findings of a poll of more than 2,000 British adults and insight from our own debt advice services, provides insight into the impact the outbreak has had on households experiencing increasing financial difficulty due to the pandemic.
Reliance on credit to plug gaps in household finances
Many households are struggling to meet payment commitments and pay for essential household costs on income alone. This research shows that:
- One in nine (11 percent) adults have fallen behind on one or more essential household bill or personal credit commitment due to Covid
- One in eight (12 percent) have had to use credit to pay for essential household bills or goods – with groceries, utility bills and council tax being the most common.
- Worryingly, just over a third who are using credit in this way have turned to high cost credit to pay for essential costs, including 11 percent who have relied on buy-now-pay-later schemes.
Job loss and income shocks driving debt problems
Many have been faced with income shocks and job loss as a result of the pandemic. This report highlights that:
- Job loss and income shocks are common reasons for financial difficulty for people contacting National Debtline.
- The proportion of unemployed callers to National Debtline rose from 34 percent last March to 42 percent by December,
- While the proportion of callers in full-time employment fell from 39 percent to 32 percent.
The long road to recovery for many
Not all households will “bounce back” from this crisis, especially those caught at the sharp end of its impacts. This research shows:
- One in five adults (an estimated 10.2 million people) are worried their finances will never fully recover from the outbreak
- Our previous Back to business research also highlights the challenges to recovery faced by unemployed people – 37 percent expect it to be more than a year before their business income returns to pre-Covid levels – while nine percent do not expect this at all.
Our recommendations
Drawing on these findings, we outline calls for coordinated action by government, regulators and industry to help people get out of debt safely and back onto a stable financial footing. Measures we are calling for include:
- A fairer and more affordable approach to collecting debts owed to central and local government in the wake of Covid-19
- Specific help for renters who have fallen into debt as a result of the pandemic, in the form of no-interest loans and grants to clear rent arrears
- A dedicated Covid-19 Self-employment Recovery Strategy.
Latest research and reports
The Money Advice Trust is committed to a programme of research which enhances understanding of the debt and credit environment and practically improves money advice. Find all of our latest research and reports here.
