New figures from debt charity StepChange have revealed that thousands of households’ finances are at breaking point as a result of the Covid-19 crisis.

The research reveals just how vulnerable people are to changes in personal circumstances with three out of four new clients identified a life event or income shock as the main reason for their problem debt – and should act as a wakeup call to policymakers, financial firms, and the Government in light of the Covid-19 crisis. Short-term support measures are not enough to resolve the national lack of household financial resilience.

The debt charity’s ‘Statistics Yearbook’ gives a snapshot of how problem debt and financial fragility were already widespread in the UK before the Covid-19 crisis, with the charity contacted by 635,091 people in 2019 – the equivalent of one person every 49 seconds. The figures also reveal new StepChange clients had an average of £14,129 in unsecured debt in 2019 – an increase of 8% in the past three years.

The most common reasons for debt among new StepChange clients were reduced income (18% of new clients), unemployment or redundancy (16%) and injury or illness (16%), another worrying indicator of people’s financial fragility. It should come as no surprise that there has been such widespread concern about the knock-on impact of coronavirus, when so many households only just manage to scrape by at the best of times.

The statistics also show just how over-represented women, single parents and young people remain among those in problem debt. 66% of people contacting StepChange in 2019 were aged 18-39, compared to 57% in 2014, while 62% were women, an increase of five percentage points in the past five years.

The increasing proportion of women contacting StepChange can be partly attributed to the concurrent rise in the number of single parent clients the charity is reporting, 87% of whom are women. Single parents made up one quarter (24%) of those who sought advice from StepChange in 2019, four times the proportion among the general population (6%). This represents a rise of a fifth in the last five years.

The growing proportion of these groups among StepChange clients points to the negative consequences of factors including the benefits freeze and rising cost of living. This must give the Government and creditors pause for thought as they work out how best to support those in need beyond the immediate crisis and into the long term.

Credit cards continue to be the most common type of debt – seven in ten (69%) new StepChange clients had at least one, with the average amount owed at £7,635. Meanwhile, almost half of new clients had at least one overdraft debt at the time of contacting the charity, owing nearly £1,500 on average.

While recent changes to overdraft charges and new guidelines for those in persistent credit card debt  are welcome measures to help people out of debt in the long-term, the current crisis will leave many at risk of spiralling debts in the short-term. StepChange is asking all providers of services and credit to ensure affected customers are provided with additional forbearance at this time.

These asks extend not only to payments on credit cards and overdrafts, but on council tax, utility bills rent and mortgages too. Two in five new StepChange clients were behind on at least one household bill in 2019, highlighting the already difficult situation many people in problem debt find themselves in. While the Government’s £500m hardship fund for local authorities is welcome, more than 66,300 new clients came to StepChange with council tax arrears, at an average of £1,146 per person. Clearly further measures will be needed in the coming months to support households’ already ailing finances.

StepChange CEO Phil Andrew said “These figures tell us that financial resilience is already critically low, despite the fact that most of our clients come from in-work households. This should show policy makers during the current economic crisis how radical they will need to be to shore up UK families. We know that 3 million people across the country are already in problem debt and 9.8 are showing signs of financial distress. Unless people are well-supported through any upcoming period of financial difficulty, we can only expect the demand for debt advice to rise.”

“We would urge Government, creditors and employers to take all necessary steps to protect financially vulnerable people from falling further into difficulty and we stand ready to do all we can to continue to provide our services to people who need them.”

“Looking further ahead, our client data should act as a powerful reminder to policymakers that it is all very well trying to triage and fix people’s problems when a debt crisis happens – but it would be even better to provide adequate support frameworks and affordable opportunities to build resilience so that more people can weather life shocks when they do happen.”