Millions of Households Facing ‘Financial Long COVID’

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Catherine Tilke

Money Savings Advice Millions of Households Facing ‘Financial Long COVID’

Millions of people are facing 'financial long Covid' as official support schemes are withdrawn nationwide.

Debt charity StepChange estimated more than 11 million people are still struggling to make ends meet as traditional coping strategies have been 'worn to the bone' by 12 months of financial hardship induced by lockdown measures and economic slowdown.

Last week, the temporary support schemes, ushered in to ease the strain of lockdown on personal finances, were officially withdrawn.

According to the charity, almost a quarter (23%) of the 1.6 million people who leaned on credit payment deferrals during the pandemic have missed payments since returning to their usual payment schedules, while half (50%) say they have only been able to make their normal payments' with difficulty'.

StepChange CEO Phil Andrew said:

As the country continues to try returning to normal, there are millions of households still struggling with Covid debt for whom 'normal' is a distant dream. A year into the pandemic, many households' coping mechanisms are exhausted, and the temporary support measures that have kept them afloat are slowly being withdrawn. Without urgent action to shore up the finances of the millions struggling to meet essential costs, Covid will cast a shadow over the economy for years to come.

In response to the findings, StepChange called for a raft of special measures to help those still vulnerable due to the pandemic.

It pointed to a looming £25 billion worth of Covid-related arrears and an emerging trend of high-cost credit borrowing to make ends meet as 'worrying' symptoms of the state of millions of households' finances.

Interest-free loans for rent arrears and protections against eviction are needed to help the 500,000 households in rent arrears, said the charity.

Meanwhile, the living standards think-tank Resolution Foundation said in January that it estimates as many as 750,00 families-- including 300,000 with children-- were in rent arrears at the start of 2021.

By implementing measures including the creation of an emergency financial package for renters, a permanent £20 uplift to Universal Credit and new packages of targeted support to help people address covid-related arrears and debt affordably, we can reduce the risk of financial long covid for households across the country

said Andrew.

The £20 uplift to Universal Credit was introduced in April last year as a boost to help low-income families cope with the financial knock-on effects of the pandemic.

Over the course of a year, it adds £1040 to the total value of Universal Credits-- a lifeline for the poorest families, say charities.

A joint letter from fifty organisations published in September 2020 claimed that the cost of extending the uplift (£9 billion per year) is offset by successive freezes and cuts to social security schemes, which have driven unemployment benefits to their lowest real value since 1990.

At its current level, Stepchange said Universal Credit 'had not been entirely effective' at offsetting financial setback during the pandemic, with 45% of those who started receiving payments since March 2020 reporting financial hardship.

If you are suffering financially as a result of Covid or are struggling with debt, call StepChange free of charge on 0800 138 1111 for free and impartial advice. 

Money Savings Advice Author Catherine Tilke

Catherine Tilke

Catherine is our specialist financial news journalist. With over 7 years of experience and a raft of contacts in the financial world, she prides herself on delivering the most relevant and up-to-date financial news for our readers.

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