COVID-19 crisis has revealed widespread financial vulnerability and long-term changes to support are necessary to build resilience, says StepChange

Debt charity says new statistics are a worrying indicator of people’s financial fragility, with many households only just managing to scrape by

The COVID-19 crisis has revealed widespread financial vulnerability and long-term changes to support are necessary to build resilience, the debt charity StepChange has said.

Publishing its snapshot of UK personal debt statistics in 2019, StepChange reports that three-quarters of its new clients say a life event or income shock was the main reason for their problem debt, with the most common reasons for debt cited as -

• reduced income - 18 per cent of new clients;
• unemployment or redundancy - 16 per cent; and 
• injury or illness - 16 per cent.

Highlighting that the figures are a worrying indicator of people’s financial fragility, StepChange warns that this should act as a wakeup call to policymakers, financial firms and the government in light of the coronavirus (COVID-19) crisis, when so many households only just manage to scrape by at the best of times.

Arguing that further measures will therefore be needed in the coming months to support households' already ailing finances, StepChange CEO Phil Andrew said today - 

'These figures tell us that financial resilience is already critically low, despite the fact that most of our clients come from in-work households. This should show policy makers during the current economic crisis how radical they will need to be to shore up UK families. We know that 3 million people across the country are already in problem debt and 9.8 are showing signs of financial distress. Unless people are well-supported through any upcoming period of financial difficulty, we can only expect the demand for debt advice to rise.

We would urge government, creditors and employers to take all necessary steps to protect financially vulnerable people from falling further into difficulty and we stand ready to do all we can to continue to provide our services;to people who need them.

Looking further ahead, our client data should act as a powerful reminder to policymakers that it is all very well trying to triage and fix people’s problems when a debt crisis happens – but it would be even better to provide adequate support frameworks and affordable opportunities to build resilience so that more people can weather life shocks when they do happen.'

For more information see New figures from StepChange reveal thousands of households’ finances already at breaking point from stepchange.org