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Household debt ‘kicked down the road’ by Covid support, warns charity

Emergency pandemic support inspired a "wait and hope" approach to debt, but thousands could be left without support when measures are rolled back this year

Two people look at bills and use a calculator as they struggle with debt

Three in five people turning to StepChange for debt advice during the pandemic were aged 39 or younger. Image: Pexels

Covid-19 was one of the top five causes of debt across the UK last year, new analysis revealed, as experts warn there is no clear route out of financial trouble for thousands.

People who faced unemployment or redundancy, health problems or cuts to their income were just as at risk of debt as in previous years, the figures showed – despite Government support measures – and remained the most prevalent drivers of debt and UK poverty.

But the types of people most likely to fall into debt changed during the pandemic, according to the StepChange report. The proportion of single adults without children facing money troubles and turning to the charity for help increased more than any other group, from 36 per cent in 2019 to nearly 45 per cent in 2020.

While this demographic is more commonly associated with younger adults, the charity said they had not seen an increase in people accessing their services under age 25, and had seen a five per cent slight increase in people aged 49-59.

However 18-39-year-olds still accounted for three in five – 58 per cent – of the charity’s clients.

“We all know what an unusual year 2020 was, and client statistics reinforce that,” said Phil Andrew, the charity’s chief executive.

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Problem debt increased, he said, and the StepChange website was “running red hot as a huge influx of people sought information”. There were 2.4 million people trapped in debt at the end of 2020 compared to 1.7 million people before the first lockdown.

Yet the charity took fewer clients through full debt advice – 200,000 compared to 300,000 in 2019, a trend StepChange said can be seen across the debt advice sector – as many adopted a “wait and hope” approach to managing their financial hardship. Many people chose instead to rely on emergency Covid-19 support or wait to see if their circumstances improved when lockdown eased.

But as that support is rolled back in the coming months, the route out of Covid-induced debt for many households is unclear, Andrew added.

It would be “entirely misleading” to see the fall in debt advice sessions as an indication that the UK’s debt problem has improved, the report warned, calling it a “temporary phenomenon” brought about by temporary support measures such as furlough, the £20 Universal Credit increase and credit payment deferrals.

It means many households’ debt issues were merely “kicked down the road”, according to the charity.

Women and single parents were disproportionately affected by debt, as in previous years, with women accounting for 60 per cent of StepChange clients.

And though single parents make up just six per cent of the UK’s population, they accounted for 22 per cent of people seeking help from the charity.

“What is equally striking is that all the debt pressures that were there before the pandemic were very much still present,” Andrew added, “concentrated among those with the least financial resources and resilience, a trend that the Covid impacts amplified.”

The debt advice is at risk of being overwhelmed by “pent-up demand” when support measures end later in the year, according to the report, calling for the Government to intervene.

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