The Covid-19 crisis has reduced financial wellbeing in the UK and consumers expect a further decline in the next six months, according to a European survey by credit management group Intrum.
Despite this, some UK consumers have experienced a positive effect on their spending. The whitepaper outlines the financial impact of Covid-19 on private households across 24 European countries. More than half the UK respondents (55 percent) reported a decline in financial wellbeing over the last six months, higher than the European average of 48 per cent. More than a third (38 per cent) expect a further decrease.
The paper’s findings build on Intrum’s European Payment Report, published in November 2019, which showed that the younger generations and households with children are under particular strain.
The Covid-19 pandemic has exacerbated this trend, with 74% of UK households with children reporting an income drop as a result of the crisis, compared with 50% of households without children. Furthermore, 55 per cent of households with children say that after paying their bills they rarely have enough money to last until the end of the month.
Across Europe, millennials are more likely to say their financial wellbeing has suffered, than other age groups. However, in the UK, 18-21 year olds appear particularly hard hit – with 69 per cent saying the crisis has negatively affected their finances, and 38 per cent saying they have gone into more debt to cover their everyday spending as a result.
Saving for the future is a concern for women – nearly half (43 percent) say they are not at all confident in their ability to save for retirement, compared with 33 per cent of men.
While the crisis is adding pressure to most consumers’ financial situations, 43 per cent of UK respondents report a positive impact on spending. With economies largely shut down, ‘non-essential’ spending, in areas such as tourism, clothing and dining is down.
Eddie Nott, Intrum’s UK Managing Director, said there is evidence that consumers who are spending less during the crisis are taking the opportunity to settle their debts. “After many of our customers paused their payment plans in March and April, we have seen a significant increase in people contacting us to settle their accounts in May.”
“However, many of our customers still need breathing space and are currently unable to pay their installments. For example, those employed in heavily-hit sectors such as retail and leisure, and vulnerable households with the smallest financial margins, such as families and young people.”
“The financial sector, and collections industry, in particular, has long offered forbearance and worked with people struggling financially. The crisis means we are now doing so on a much larger scale.”
Some of the statistics from the report include:
- More than half (55 percent) say their financial wellbeing has declined compared with six months ago
- 38 percent expect it to decrease further in the next six months
- Less than a quarter (21 percent) expect it to improve.
- nearly half (47 percent) have had their employment affected by Covid-19
- 59 percent have seen a decrease in household income.
- 46 percent say their bills are increasing at a higher rate than their income
Households with children feel the strain
- 74 percent of households with children have experienced a decrease in income because of Covid-19, compared with 50 percent of those without
- 55 percent of households with children say that after paying their bills they rarely have enough money to last until the end of the month.
Younger people take on more debt
- More than half (58 percent) of millennials (22-37 year olds) say that Covid-19 has negatively impacted their wellbeing, compared with 54 percent across all age groups.
- Employment has been particularly affected among this generation: 74 percent of millennials have lost income because of the crisis, compared with 59 percent across all age groups.
- 18-21 year olds are also suffering – 38 percent say they have gone into more debt to cover everyday spending as a direct result of the crisis.