Young people, ethnic minorites and renters most at risk of debt caused by coronavirus pandemic, says IPPR

New report calls for urgent action to address financial impact of pandemic and longer-term action to prevent problem debt, including technological innovation and access to affordable credit

Young people, people from ethnic minority communities and renters are most at risk of debt caused by the coronavirus (COVID-19) pandemic, according to a new report from the Institute for Public Policy Research (IPPR).

In Helping households in debt, published today, IPPR examines how the financial impacts of COVID-19 may affect people in different demographic groups and regions and explores experiences of debt and household finance before and during the pandemic.

Drawing on data from a regular survey of UK households and a special survey carried out soon after the first peak of the pandemic, IPPR's findings include that -

• young people aged between 16 and 29 are more than twice as likely to have lost their jobs or stopped working than the average during the pandemic;
• ethnic minorities are twice as likely to have lost their jobs or stopped working during the crisis than white people;
• while renters and mortgage-holders are more likely to hold debt, be struggling financially and be behind on bills, on average renters are significantly more likely to anticipate facing financial difficulty (26 per cent) than owners (7 per cent) or mortgage-holders (11 per cent);
• people on low incomes were struggling pre-crisis and are more likely to anticipate financial difficulty during the pandemic or to have lost their jobs; and
• those with long-term health conditions or a disability are also more likely to live in households behind on bills and have higher expectations of experiencing financial difficulty during the pandemic.

In relation to the regional effect of COVID-19, IPPR finds that higher pre-pandemic debt levels, coupled with low average incomes and tough local restrictions, mean that people in the North East and East Midlands are most at risk of problem debt, while people in London are more likely than people in other areas to report struggling financially and being behind on bills before the crisis - potentially linked to higher housing costs - but have relatively low consumer debt levels.

IPPR goes on to recommend urgent action to address the impact of the pandemic on household debt, as well as long-term action to prevent problem debt occurring, including -

• establishing local partnerships - the government should increase support for major debt charities, local authorities, stakeholders and communities to partner to address problem debt and promote engagement with debt advice;
• improved communication - information about debt and affordability should be in clear plain English, without impenetrable jargon;
• investment in technological and social innovation - to use digital practices such as ‘open banking’ to make it easier for people to plan budgets and to improve affordability checks by creditors, alongside action to reduce digital exclusion; and
• improve access to affordable credit - including better access to low-cost credit though credit unions or other community finance initiatives with government support and funded through multiple stakeholder partnerships that reflect community opportunities and demand.

Commenting on the report, IPPR North Senior Research Fellow Anna Round said -

'Too many people found it hard to make ends meet before COVID-19 - the pandemic will make their lives even more difficult and push people into debt who were only just managing before. We need support in the short-term to make sure that households and local economies don’t bear the brunt of problem debt as a result of COVID-19, and long-term action to prevent problem debt - including technological innovation and access to affordable credit.'

For more information, see Winter Covid debt warning: young people, ethnic minorities, and renters at most financial risk from ippr.org