Years of austerity coupled with low interest rates have resulted in record levels of personal debt. In October 2019, during those halcyon days before any of us had heard of Covid-19, there was already concern amongst debt charities and StepChange estimated that over 3-million people had fallen behind on an essential household debt in that 12-month period. Fast forward a few months, and we find ourselves in a situation none of us could ever have predicted.
The International Labour Organisation (ILO) claims ‘The Covid-19 pandemic has created the worst economic crisis since the Great Depression’. Unprecedented numbers of people have had their income cut due to furlough, or unemployment, and while families across the country battle to cope with the economic shock of the crisis, it is inevitable that for many, the struggle to meet their financial commitments will only become more difficult.
Poorer areas, less well equipped to deal with the impact of a pandemic, have fared the worst and experienced significant hardship. Public Health England announced infection rates were 2 to 4 times higher in Local Authorities with large low-income populations compared to more affluent parts of the country. Identified as being especially vulnerable was the North of England. The Institute for Public Policy Research found the number of people in the North of England claiming unemployment benefit has risen to 657,900. The highest level since 1994 with women and younger workers bearing the brunt.
To make matters worse this is unfolding at a time when, according to The Money Charity, the total amount of personal debt in the UK at the end of October 2020 was higher than ever at £1,688.5 billion. Credit card debt averaged £2,177 per household and £1,145 per adult. Whilst a study by money.co.uk, found that the average British adult ended 2020 with £9,246 worth of total debt.
This comes amid rising concerns that unregulated Buy Now Pay Later (BNPL) credit companies – which target online customers with offers of easy credit at the point of checkout – are leading younger people into unsustainable levels of debt.
With more of us shopping online than ever before these companies have seen a surge in growth throughout 2020 and whilst they claim not to be directing their campaigns at younger people who are likely to already be struggling to make ends meet, inevitably it will be these people who find the offers of easy credit most difficult to refuse.
Your Money reports that over the festive period, Christmas shoppers ran up a record breaking £2.3 billion of BNPL debt and almost half of those customers were under 35years old. Worryingly, the North East was one of just three areas which together accounted for the majority of BNPL consumers in this period.
The debt charity StepChange which provides free, expert, debt help, and advice recommends that anyone who is experiencing debt issues should seek advice as soon as possible. The following organisations are all impartial and can help you with your financial recovery:
StepChange Debt Charity 0800 138 1111
National Debtline 0808 808 4000
Money Advice Service 0800 138 7777
Citizens Advice 0800 144 8848 (England only.)
If your finances have been impacted by Covid-19 you have until 31 March 2021 to ask your creditor for a six-month payment deferral.
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