The negative impact of the pandemic will hit household finances long after the current lockdown lifts, according to the latest Household Financial Confidence Tracker from comparethemarket.com. UK households believe it could take, on average, three years for their finances to recover to the levels of stability they enjoyed before the pandemic hit.
The third national lockdown which began on 6th January is set to officially last until March 31st, however the Prime Minister has cautioned that the measures are under continuous review. Should the restrictions continue beyond this date, it will have serious financial consequences for UK households.
Over a third (36%) of households have not managed to save any money since the first lockdown was announced in March last year. A fifth (20%) say they have taken a salary cut or been furloughed. Over half (52%) say they are eating into their savings and 53% are worried about running out of money. A fifth (20%) feel there is less financial support available from the Government and banks this time around and a smaller but significant number (8%) are now financially responsible for more people which, in turn, impacts their finances.
The research suggests this latest lockdown is impacting families with children at home more than those without. Over a quarter (29%) of families with children at home struggled to pay their bills in the past week, compared with 16% of those without children at home. In addition, 28% of families with kids say they feel less financially secure this time around than in previous lockdowns, compared to 16% of households who do not have children at home.
The ongoing closure of schools is a drain on household budgets as 17% have had to sacrifice a portion of their income to take time off work for childcare, home schooling, or to provide wider support to their household.
If the lockdown lasts beyond March, over one in ten (13%) families with children at home will need to take on more debt, and a similar number (11%) will need to turn to family and friends for money – a worrying figure given that nearly a fifth (19%) feel the widespread impact of the pandemic now means there is less financial support available to them through loved ones.
If the restrictions carry on beyond April, nearly one in ten (9%) families with children at home fear they will not be able to afford their rent or mortgage, will need to apply for a payment holiday, or even take on another job to make ends meet.
Ursula Gibbs, Director at comparethemarket.com, said “Although the vaccine roll out is a much-needed light at the end of the tunnel, unfortunately for many families the financial impact of the coronavirus will be felt long after lockdown lifts. Families with children at home are particularly affected and many are more concerned now about their ability to pay bills and make ends meet than at any other point in the past year.”
The fact that over a quarter of families with children at home feel there is less support available from banks – and nearly half (44%) say they are concerned about tightening eligibility criteria – shows just how important it is that financial providers continue to provide the support and understanding they have demonstrated so far throughout this very difficult time.”
“However, there is some good news for families. Our data suggests that household bills fell by an average of £174 over 2020 for those who switched providers. A typical household spent £2,527 on motor insurance, home insurance and energy over the past year – falling from £2,702 in 2019 – the cheapest level since 2017. Switching providers for household bills can therefore help to relieve some of the financial pressure caused by the coronavirus pandemic.”