The results of a national financial impact tracker published today by Standard Life Foundation show 50 per cent of UK households believe they will struggle to meet their financial commitments over the next three months. Researchers found that, since the beginning of the pandemic, 7 million households (a quarter of all households in the UK) have lost a significant part of their earned income as a consequence of the crisis. This included people who had either been laid off temporarily and received no wage, become unemployed or lost all of their self-employed income, or had seen a big drop in wages/self-employment income.
This is the first report from Standard Life Foundation’s coronavirus financial impact tracker, which monitors the economic effects of the pandemic on people’s finances. Every month, researchers question 6,500 people across the UK on how their personal and household finances have been affected by the pandemic and the likely impact it will have over the next few months. It found many households’ financial situations were in a poor situation before the crisis and the outlook for many is not good, with the crisis causing widespread financial anxiety.
Government support will go some way to mitigating these income losses. However, 4 in 10 who had lost a substantial part of their income as a result of the crisis did not think they of their partner will benefit from either the Job Retention Scheme (employee furlough) or the Self-employment Income Support Scheme.
Researchers found:
- Half of all households are feeling anxious about their finances
- 20 per cent were expecting to be reliant on the government’s Job Retention Scheme
- Only 7 per cent were expecting support from government’s self-employment scheme to cover 80 per cent of lost income.
- Households whose main income is from the ‘gig economy’ are three times more likely to be in serious financial difficulty.
7.9 million households (28 per cent of the UK) are currently experiencing financial difficulties. This includes around 3.1 million households in ‘deep financial difficulty’ and a further 4.8 million households are clearly ‘struggling to make ends meet’. A further 10.4 million households were found to have little financial resilience and were potentially exposed to financial shocks. The remaining 10 million households (35 per cent) in the UK were financially secure.
Looking to the near future, 7.7 million households (28 per cent) anticipate some fall in income over the next three months.
1 in 5 have used credit to pay for food and other essentials during the crisis. But just 1 in 10 have sought financial or money advice.
The tracker found stark differences between different age groups; 6 per cent of those in serious financial difficulty were retired, but this group made up 44 per cent of those who were financially secure. There were also differences between family types: those with dependent children (especially lone parents) and single adults were more likely to be in financial difficulties; and couples with no children or adult children living with them were less likely to be in financial difficulties.
Despite the early announcement of mortgage holidays to help households, it was found that those who rent were at greater risk with 64 per cent of those in serious financial difficulty being renters compared with 31 per cent of home owners. 86 per cent of those who were financially secure were home owners. Disabled people were disproportionately affected – more than twice as likely to be in ‘serious financial difficulties’. Those working in the private sector were more likely to be facing ‘serious financial difficulties’.
Elaine Kempson, one of the report’s authors, said:
“The pandemic is hitting people’s finances harder and faster than the last economic downturn. Unlike previous economic downturns it is affecting people in all parts of the country equally. The swathe of people hit by this recession is going to be larger than we’ve seen before, and affect groups who have not been hit by previous recessions.”
Alistair Darling, Chair of Standard Life Foundation, said:
“We know that whilst everyone will be affected by the virus we will not all be affected equally. This is shown by the disproportionate number of renters, disabled people, the self-employed, and those with dependent children in serious financial difficulty. Not only do we need to ensure that the inequalities which existed before the pandemic are not made worse by it, the government needs to take action to deal with this growing problem by putting appropriate policies in place.”
Mubin Haq, CEO of Standard Life Foundation, said:
“We are facing challenging times, so it is not surprising half of UK families feel anxious about their finances. The government has gone some way to ensuring people are able to weather the financial storm. However, 4 in 10 who have lost a significant part or all of their earnings do not think they will benefit from the government’s furlough or self-employment schemes. We have strong evidence that existing measures will not be sufficient and more are expected to be in financial difficulties over the coming months. There is much more we need to do to ensure people have a secure safety net.”
The survey compares the UK with the situation in Norway where a similar monthly financial tracker is being conducted. The Norwegian population is faring far better. Compared with the UK, almost twice the proportion of Norwegian households (62 per cent compared with 35 per cent) was financially secure. And the proportion of households struggling or in serious financial difficulty was less than a third of the UK level (8 per cent compared with 28 per cent).
