Credit, Collections & Insolvency News
The divide between rich and poor is widening, as many consumers have grown their savings during the COVID-19 pandemic, while others are struggling to make ends meet according to new research by TransUnion.
The research reveals the pandemic has given over a third (35%) of UK adults the chance to increase their savings and 16% have reset their finances. Yet, at the same time, 14 million people have accumulated an average debt of nearly £400 each, totalling £5.7 billion debt since the first lockdown.
27% of UK consumers have accumulated some level of debt in the past 12 months, at an average of £399.20. According to latest ONS figures, the current UK adult population is 52,673,433, which means 14,221,827 consumers have collectively accumulated a sum of £5,677,353,338.
The findings show that one in four adults (25%) feel uncomfortable with their current amount of debt – which has almost doubled as a result of the ongoing health crisis– and one in 10 say their finances won’t recover until at least 2022.
Triggers for this debt include people using credit to supplement income as furlough has left them short (6%), and parents unable to work because of childcare commitments (4%).
At the same time, one in three UK consumers (35%) have increased their savings during lockdown. This is likely down to them being more frugal when it comes to spending (26%) and limiting bigger purchases (16%).
Kelli Fielding, TransUnion’s managing director of consumer interactive in the UK said “Our tracking the ongoing financial impact of the COVID-19 pandemic on UK consumers gives a polarised view. On the one hand, over half those surveyed are feeling positive about the future (54%), but at the same time, four in 10 say their household income is currently being negatively impacted (38%). Almost one in 10 (9%) have been using credit to supplement their living expenses and that’s a big factor in the amount of debt that’s been accumulated during the pandemic.”
There is evidence, however, of better financial understanding – with one in three UK consumers saying the pandemic has made them more aware of their spending (33%) – and half (50%) monitoring their credit score at least monthly, up from a third (33%) at the start of May 2020.
Fielding adds “It’s great to see that over half of consumers (51%) think their credit score has either stayed the same or improved over the course of the pandemic but it’s a concern that a quarter have never checked it. Being familiar with your credit profile is essential when it comes to managing your financial standing and understanding what your options are in terms of accessing finance and managing your debt.”