As the UK battles the ongoing Coronavirus pandemic, many are facing difficult circumstances and struggling to make ends meet.
New data from the StepChange Debt Charity finds levels of coronavirus-related household debt have hit £10.3bn across Britain an increase of £4.3bn since May, with the holidays around the corner, that figure is expected to rise further.
Recent studies show that in the three weeks following the March lockdown around 7 million households had lost all or a substantial part of their income due to the pandemic, with 11% reporting being in serious financial difficulty. By May 14 million people had experienced a direct negative impact on their income, according to StepChange.
According to the charity 29% of the adult population have experienced a negative change of circumstance due to COVID-19, such as unemployment or redundancy, or furlough with a reduction in salary. The impact of the change has had the potential to turn manageable debt into a major burden for families and individuals, with severe consequences for wellbeing and mental health.
Household debt levels were rising prior to the pandemic, 27 % entered the pandemic holding consumer debt and 10% were behind on their bills. During the crisis, people surveyed expect a one in seven chance of not being able to pay their usual bills on average.
Now the figures show 7.1 million have fallen behind on essentials or borrowed to make ends meet, averaging £1,365 arrears and £1,577 in debt per adult affected.
17% of those whose financial situation has been negatively impacted have experienced one or more indicator of hardship since March, including having had fewer than two meals a day for two or more days and having rationed or gone without basic utilities (such as electricity, heating or water) for five or more days.
In October, new research from Citizens Advice showed significant numbers of people risk being pushed into a position where they can’t pay their essential bills. They could face spiralling debts if the uplift to Universal Credit and Working Tax Credit is not extended beyond April 2021. Around 75% of people in receipt of uplifted benefits who seek Citizens Advice’s help with debt would be unable to meet their essential costs if the uplift was removed.
In August, Citizens Advice found one in nine people, the equivalent of six million people across the UK, have reported falling behind on household bills because of coronavirus. This research suggested that certain groups of people had fallen behind on bills more than the national average.
Research from the Think Tank IPPR suggests that the debt crisis is having an adverse effect on certain areas of the UK.
Young people aged between 16 and 29 were over twice as likely to have lost their jobs or stopped working than the average during the pandemic. Of those aged 18 to 29 employed in January and February, 10.5 % were unemployed or otherwise out of work by June. Across all age groups it was 5.1%.
Ethnic minorities are twice as likely to have lost their jobs or stopped working during the crisis than white people. People from Asian, black and other minority ethnic communities were also more likely to face financial difficulties before the crisis, and are more likely to expect difficulty paying bills during the lockdown. Between 27 and 34%, compared to 14% across all groups.
Renters, those on low incomes, and those shielding due to long-term health or living with a disability are also high on the list of those effected by the pandemic.
Phil Andrew, CEO of StepChange said
“This report paints a picture of a nation sleep-walking into a debt crisis. Despite a bold initial reaction to the pandemic, the government and financial services sector’s toolkit of responses has not evolved, and the result is a spiralling number of people being plunged into debt due to Covid-19. And the worst is yet to come.
“This winter, a second national lockdown will drive unemployment, reduced hours and rising energy bills, all of which is hampering economic recovery.
Graham O’Malley, Senior Debt Expert at Citizens Advice says:
“If you’re struggling with debt it’s important to not bury your head in the sand. There’s help and support available.
“Many organisations like energy companies have put in place protections for people who’ve struggled to pay their bills because of coronavirus, so you should contact them to talk about your problems as soon as possible.”
A Bradford Council spokesperson said: “We know that this is a difficult time, financially, for many people and we will always try to support anyone who is struggling.
“Bradford Council funds independent welfare advice services across the district whose services are available through telephone and internet options. The Council spends approximately £2m annually on welfare advice. In recognition of the rise in support expected due to the economic impacts of COVID19 the Council invested an additional £350,000 in these up to the end of the financial year.
“The Bradford Credit Union, which is housed and financially supported by Bradford Council, offers access to savings accounts and loans at affordable rates. During the pandemic, they have, in recognition of the impact that debt causes on households and individuals’ mental health, teamed up with mental health services to offer a wider choice of products to help alleviate anxiety and money worries.”