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Coronavirus and personal debt: a financial recovery strategy for households

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Compared to the Great Recession, households with low- to middle-incomes entered the present crisis more likely to be facing problem debt and struggling to pay for essentials. In December 2019, 3.2 million people in the UK were in severe problem debt and 9.8 million showing signs of financial distress.

The government has implemented a series of crucial public health measures to control the spread of coronavirus that have profound consequences for the economy and household finances.

The government has also put in place a series of unprecedented measures to protect incomes and businesses during the outbreak period. However, these schemes have not protected all households against loss of income.

Struggling households now face a cliff edge when temporary protections against eviction and enforcement action expire.

Policy makers should now turn their attention to preventing this outcome through a financial recovery strategy for households addressing three priorities:

  1. Strong protections against housing insecurity and unaffordable repayment demands
  2. Grants to address debts accumulated to pay for essentials during the crisis
  3. Investment and reforms to the social safety net to help struggling households recover

Here, you can find some of the key findings from our latest research:

Number one

Average of £1,076 in arrears and £997 in debt per household

We estimate that 4.6 million people negatively affected have accumulated £6.1 billion of arrears and debt, averaging £1,076 in arrears and £997 in debt per adult affected.

These figures reflect the situation as of late May and are likely of increase substantially before the lockdown is fully phased out; a process that remains uncertain.

4.6 million people affected have accumulated £6.1 billion of arrears and debt
Number 2

2.8 million people have fallen into arrears

Since the beginning of the coronavirus lockdown period, 2.8 million people have fallen into arrears: most frequently utilities (1.2 million people), council tax (820,000 people) and rent (590,000 people).

3.8 million people have borrowed to make ends meet, most often using a credit card (1.7 million), an overdraft (1.6 million) or a high cost credit product (980,000).

Other common financial coping strategies include using savings, asking family and friends for help, applying for Universal Credit, and selling possessions.

590,000 people have fallen into rent arrears
Number 3

People are struggling to pay for essentials

44% of those affected with an income of less than £30,000 have fallen behind or borrowed to make ends meet compared to 25% of those with an income of £50-60,000 (and 29% with an income of £70,000 or more). Of those who have fallen behind on essentials, two-thirds (67%) have also borrowed to make ends meet.

17% of adults are worried about being able to afford essentials

For further demographic and debt information, please read the full report.

Download the report

Want more information?

Email us to discuss our coronavirus lockdown personal debt statistics and other debt research across the UK.