Two thirds of households say pandemic will impact finances long term

Families are coming to terms with the fact that their finances could be negatively affected by the coronavirus pandemic long after the lockdown lifts. According to the second week of comparethemarket.com’s Financial Confidence Tracker, over two thirds (67%) of households with children at home think the economic impact of the pandemic will have a long-term negative effect on their household finances. This compares with just over half (51%) of the general population.

For families with children at home, over a third (36%) think they will have to cut back or make financial sacrifices for six to twelve months after the lockdown ends. This is a significant increase compared to the general population where a quarter (25%) anticipate making cutbacks for this period of time. Nearly a fifth of families with children (18%) believe the pandemic will have a very long-term negative impact on finances lasting several years, versus 16% of the wider population.

According to the Financial Confidence Tracker, which provides weekly analysis on the UK’s financial confidence levels, the number of people who struggled to pay household bills in the last week increased by a percentage point from 17% to 18%, whilst the proportion who are not confident that they will be able to keep on top of payments in the coming weeks remained at one in five (20%).

Although confidence levels remain flat, the reasons behind people’s financial anxiety are becoming clearer. Amongst those who are not confident about the future of their finances, the number who say their working circumstances have changed for the worse jumped from 39% to 45% over the past seven days, because they had been furloughed, received a pay cut or lost their job. Similarly, the proportion of people struggling because their income is not enough to cover their outgoings has increased from 38% to 43%.

With more positive stories in the media around an exit from lockdown and a steady decrease in the number of daily fatalities, the impact of negative news stories on confidence has declined somewhat, falling six percentage points from 29% to 23% over the last week. Equally, the proportion of parents worried about paying their bills over the coming weeks has fallen marginally from 31% to 28%, perhaps because of the recent government narrative around reopening schools in the near future.

Despite some signs of more positive news appearing in the media, there is evidence that the longer the lockdown continues, the more wary people are becoming about returning to normal life. The number of people who said they would not feel confident visiting restaurants, cafes, pubs and cinemas once they re-open has risen from 39% to 43% over the past week. Under a quarter (24%) of people trusted that these venues would take the appropriate hygiene and social distancing measures required to keep them safe, and over a third (34%) said they would not feel in control of their surroundings and therefore wouldn’t enjoy themselves.

London continues to have the lowest financial confidence of any UK region, with the proportion of people unsure that they will be able to meet the demands of their household bills in the coming weeks flat at 27%. By contrast, those in the West Midlands saw the biggest dip, with the number of people saying they are not confident in paying bills over the coming weeks rising six percentage points from 14% to a fifth (20%).

Anna McEntee, product director at comparethemarket.com, said “Household financial confidence in the wake of the pandemic remains low across the UK, and there is evidence that the impact of COVID-19 is having a very real – and increasing – impact on consumers, many of whom are finding that difficult job prospects mean it is harder to stay on top of bills and household finances. The number of people who struggled financially over the past seven days has increased, albeit marginally, and the proportion who expect these worries to continue remains flat, suggesting we have some way to go before the nation starts to feel back in control of their money. The fact that so many households with children expect to make financial sacrifices for years to come shows the stark impact of COVID-19 on our lives for the long-term, especially for those who need to look after dependents.”

“With the national conversation increasingly focused on what an exit out of lockdown might look like, there is hope that some businesses may soon re-open. However, with more people this week than last week saying they would not be confident going to cafes and restaurants, it may be difficult to persuade the public it is safe to switch back to “normal” life and, consequently, that the economic recovery will be a gradual rebuild rather than a sharp rebound.”

Percentage of those not confident in being able to meet the demands of / pay household bills over the coming weeks:

	Week of 27 April 2020	Week of 4 May 2020	Percentage point change week on week
Scotland	21%	20%	-1
North East	24%	22%	-2
North West	22%	22%	0
Yorkshire & Humberside	14%	15%	1
West Midlands	14%	20%	-6
East Midlands	19%	18%	1
Wales	21%	21%	0
Eastern	16%	17%	1
London	27%	27%	0
South East	22%	17%	-3
South West	21%	22%	1
Northern Ireland	20%	18%	-2