New research from debt charity StepChange shows that levels of household borrowing and arrears linked to coronavirus have soared to £10.3bn since the start of the pandemic, an increase of £4.3bn (66%) since May.
Stepchange’s latest report, Tackling the Coronavirus Personal Debt Crisis, has found the number of people affected by coronavirus who are in severe problem debt has risen to 1.2 million – nearly doubling since March – with a further 3 million at risk.
The charity is warning that, with coronavirus restrictions set to hamper economic recovery for months to come, the country is facing a new and unprecedented debt crisis unless the government implements a clear, preventative plan to tackle it.
The results of national polling show that 14.9 million people – 29% of the adult population – have experienced a negative change of circumstance due to COVID-19, such as unemployment or redundancy, or furlough with a reduction in salary.
Among this group, 7.1 million have fallen behind on essentials or borrowed to make ends meet, averaging £1,365 arrears and £1,577 in debt per adult affected.
Since March, 25-34-year-olds have been most at risk of both falling behind on essential bills and borrowing to make ends meet, and of experiencing one or more forms of hardship, while families with dependent children – particularly single parents – have been squeezed by falls in income and additional childcare costs.
Financial difficulty is also unsurprisingly associated with low household income, with twice as many people with an income between £10k and £20k having fallen behind or borrowed to make ends meet as those with an income between £50k and £60k, while three times as many have experienced hardship.
In response to this growing crisis, Stepchange is calling on the government to urgently develop plans that go beyond the current crisis management response to a recovery strategy that puts people swept into debt at its heart.
Commenting on the report, Phil Andrew, Chief Executive of StepChange, said: “This report paints a picture of a nation sleep-walking into a debt crisis. Despite a bold initial reaction to the pandemic, the government and financial services sector’s toolkit of responses has not evolved, and the result is a spiralling number of people being plunged into debt due to COVID-19. And the worst is yet to come.”
Credit Union Director Elisabetta Bertero added: “We would urge people who are struggling financially or worried about money issues to contact us, or one of the other organisations out there that can help. The Credit Union will do what it can of course, but above all we would advise people not to bury their head in the sand or turn to loan sharks or high cost lenders, which can only make things worse.”
Click here for information on managing your money, visit the Money Advice Service website for free, impartial money advice or visit StepChange for free, expert debt advice.
