As 2020 came to a close, the fuller picture of Covid-19’s effect on UK household finances continued to emerge, demonstrating the significant mounting financial impact of the pandemic, according to the January 2021 Money Statistics, produced by The Money Charity.
Moving into the final month of 2020, the uneven and heavy financial burden being shouldered by many millions of UK households became plainer. By December 2020, 8.9 million people had borrowed more money because of the pandemic’s impact, while one-third of low-income families were reported to have increased their spending through 2020 in order to cover the extra costs arising from Covid-19 restrictions.
The UK unemployment rate continued to rise, with the total figure up by 418,000 in the year until November 2020, to 1.72 million in total, amounting to 5% of the total UK workforce. Redundancies surged by 4,341 per day between September and November 2020.
Meanwhile, evidence of increasing financial inequality continued to be seen with many households fortunate to have been buffered from the pandemic’s worst effects and instead seeing their financial situation improve in 2020.
The UK household savings rate continued at a high level, 16.5% of income, between July and September 2020. Outstanding credit card debt fell by 17.8% and first-time buyer house prices rose by 7.3% in the year to November 2020. The contrast between increased savings for some households but increased debt for others is one of the most striking facts of the pandemic.
Michelle Highman, Chief Executive of The Money Charity said “The Government have put real emphasis on their agenda of “levelling up” communities across the UK in the coming months and years, but these signs of widening inequality are a serious challenge to that. To achieve that agenda, ways will need to be found to recover the financial positions of those on low incomes and others adversely affected by the pandemic, including the young, the self-employed and those who have lost their jobs because of the ongoing restrictions we’re all living under.”
“We believe that Financial Capability must be a critical element of any roadmap to recovery, with urgent needs for better contingency saving, robust Financial Education for all young people before entering the workforce or higher education, as well as improved and simplified pension saving. With these and other factors fully integrated into levelling up, the UK can succeed in increasing its Financial Wellbeing across all communities.”