UK households have been worse affected by Covid-19 poverty than their counterparts in France and Germany, according to a cross-country comparison of the pandemic’s effects on inequality.
Brits faced a “far bigger living standards hit” than those in France and were more likely to rack up debt, despite being just as likely to have lost work in lockdown. Analysts said the UK’s “weaker” welfare system let people fall through the gaps.
A higher level of poverty prior to the pandemic and fewer people having substantial savings also left family finances less resilient to the economic shock of Covid-19 than in similarly wealthy European countries, despite average incomes being roughly the same.
One in three UK households (33 per cent) report having had to cut back their spending, compared to 22 per cent in France and 21 per cent in Germany.
“It’s vital that households’ financial position is strengthened as we finally emerge out of the Covid-19 crisis, so that they are less exposed when the next economic crisis comes along,” said Maja Gustafsson, an economist at the Resolution Foundation, which carried out the study.
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“Typical households across the UK, France and Germany had broadly the same income levels on the eve of the Covid-19 crisis. But beneath this similarity lie big differences in households’ financial resilience, with UK households having fewer savings to draw down, and a far less generous benefit system to protect them in hard times.”
Where at least one person had lost their job during the pandemic, more than two in five (41 per cent) of UK households experienced a severe income cut amounting to at least 25 per cent.
This was twice the rate in France (20 per cent) and markedly higher than that in Germany (28 per cent).
Before the first lockdown last March, the UK’s poorest households had incomes 20 per cent lower than the poorest households in France.
The UK Government implemented much stricter, longer-lasting restrictions which hit the national economy compared to those used in France and Germany, the researchers said.
“These holes in UK households’ financial resilience have been exposed during the Covid-19 crisis,”said Gustafsson. “They are far more likely to have suffered a major living standards hit than French and German households, and are far more likely to have taken on debt to cope with these financial shocks.”
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People in the UK who suffered financially during the pandemic were twice as likely as those in France and Germany to take on more debt to cover living costs.
The end of the crisis looks “closer in the UK than elsewhere in Europe,” the report said, thanks to the success of the vaccine rollout. But this “should not distract policy makers from UK households’ relatively weak financial resilience”, which left them “much more exposed” to economic crisis than others in Europe.
The financial impact of the pandemic on families will last well beyond lockdown, according to the report, and researchers called on leaders to respond in a way which would keep families out of poverty long-term.
Chancellor Rishi Sunak introduced a series of temporary support measures at the beginning of the crisis, including a weekly £20 universal credit increase, but this is set to be cut in September.