UK The Impact of COVID-19 on Household Finances Market Report 2021
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Description
“COVID-19 has impacted British business and social life like no event since the Second World War. Household finances have not been exempt from this. Rising unemployment and income cuts have plunged some – particularly already vulnerable groups – into financial difficulty. However, furloughs, reduced spending and a rise in remote working have all softened the impact across the population. This has produced a two-tiered crisis, with those able to maintain full incomes able to boost savings and improve their finances. This in turn will generate a two-track recovery and further deepening in inequalities.”
– Rich Shepherd, Associate Director – Financial Services
Key issues covered in this Report
- The impact of COVID-19 on financial wellbeing and consumer confidence.
- The impact of COVID-19 on work, including experiences of furloughs, job losses and changes in income
- Consumers’ spending habits during the pandemic, including cutting back on non-essential spending and big-ticket purchases, and savings activity
- Consumers’ spending priorities for the post-pandemic environment.
Table of Contents
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Overview
- Key issues covered in this Report
- COVID-19: market context
- Economic and other assumptions
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Executive Summary
- Impact of COVID-19 on household finances
- Figure 1: Short-, medium- and long-term impact of COVID-19 on household finances, April 2021
- The market
- Overall, financial wellbeing has risen despite the pandemic
- Figure 2: The Financial Wellbeing Index, January 2015-March 2021
- A record drop in economic output…
- Figure 3: Annual percentage change in GDP, 2007-25 (forecast)
- …but the furlough scheme has limited the rise in unemployment
- Figure 4: Quarterly unemployment rate, Q1 2008-Q1 2026 (forecast)
- The consumer
- Furlough saved finances for many, while remote working will shape the future of work
- Figure 5: Impact of COVID-19 on employment and working patterns, February 2021
- A third of employees expect to look for a new job in the next year…
- Figure 6: Likelihood to look for a new job in the next 12 months, February 2021
- …with money top of the list, but many other factors in play
- Figure 7: Reasons to look for a new job in the next 12 months, February 2021
- Most incomes have remained stable since the start of the pandemic
- Figure 8: Impact of COVID-19 on personal income, February 2021
- Spending cuts mean savings boosts, but not for all
- Figure 9: Value of savings and investments, February 2021
- Two thirds have cut back on non-essential spending
- Figure 10: Impact of COVID-19 on household debts and spending, February 2021
- Holidays are the most commonly deferred purchase…
- Figure 11: Major purchases that consumers have put off as a result of COVID-19, February 2021
- …and top consumers’ post-pandemic priorities
- Figure 12: Financial priorities when COVID-19 is no longer a concern, February 2021
- Impact of COVID-19 on household finances
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Issues and Insights
- One crisis, many outcomes; financial inequality set to widen…
- …producing opportunities at both ends of the market
- The experience economy is set for a strong rebound
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The Market – Key Takeaways
- Household finances have improved despite the pandemic
- The biggest fall in economic output on record
- Furloughs have saved millions of jobs
- Under-25s have taken the brunt of job losses
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Household Finances
- Households have experienced variable COVID-19 effects on finances
- Figure 13: Short-, medium- and long-term impact of COVID-19 on household finances, April 2021
- Financial wellbeing has risen despite the pandemic…
- Figure 14: The financial wellbeing index, January 2015-March 2021
- …but lower incomes mean consumers are more likely to feel worse off
- Figure 15: Changes in household finances, January 2015-March 2021
- Confidence has recovered after a sharp hit from the initial COVID lockdown
- Figure 16: The financial confidence index, January 2015-March 2021
- Learnings from the last recession
- Households have experienced variable COVID-19 effects on finances
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Financial Activity
- Financial activity sank as lockdowns cut off spending opportunities…
- Figure 17: The financial activity index, January 2015-March 2021
- …leading to record saving activity…
- Figure 18: Monthly changes in household savings, January 2016-January 2021
- …and a sharp fall in borrowing
- Figure 19: Monthly net consumer lending, by type, January 2016-January 2021
- Financial activity sank as lockdowns cut off spending opportunities…
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The Economic Impact
- The biggest fall in economic output on record…
- Figure 20: Annual percentage change in GDP, 2007-25 (forecast)
- …fuelled by a historic fall in spending
- Figure 21: Annual percentage change in household consumption, 2007-25 (forecast)
- Prices dipped as consumption fell, and are forecast to stay under control
- Figure 22: Average annual rate of inflation (CPI), 2007-25 (forecast)
- The biggest fall in economic output on record…
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The Labour Market
- Unemployment is forecast to peak at the end of 2021
- Figure 23: Quarterly unemployment rate, Q1 2008-Q1 2026 (forecast)
- Under-25s have taken the brunt of COVID-19 job losses
- Figure 24: Change in number of employees on payroll, by age, February 2021 vs February 2020
- The number of working hours remains well below the pre-pandemic peak
- Figure 25: Total actual weekly hours worked (people aged 16+), seasonally adjusted, November 2005-January 2006 – November 2020-January 2021
- Unemployment is forecast to peak at the end of 2021
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Regulatory and Legislative Changes
- More than 11 million roles have been furloughed
- Figure 26: Number of employments furloughed, time series, March 2020-February 2021
- Hospitality and retail have accounted for almost half of furloughs
- Figure 27: Share of average monthly furloughs, by sector, March 2020-February 2021
- SEISS claims neared £20 billion by the end of January
- Figure 28: Volume and value of SEISS claims, by grant, May 2020-January 2021
- Benefits enhanced to support the most vulnerable
- Payment holidays have seen millions through periods of reduced income
- Spending has been encouraged where possible
- Figure 29: Use of the Eat Out to Help Out scheme, 17 August-4 September 2020
- Stamp duty relief kickstarted the housing market
- More than 11 million roles have been furloughed
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The Consumer – Key Takeaways
- Uneven experience of furlough and job losses will deeper inequality
- Spending cuts have led to excess savings
- Holidays are the most commonly deferred purchase…
- Making up for lost time in work and play
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Impact of COVID-19 on Consumer Behaviour
- COVID-19 concerns have followed the trend in case numbers
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- Figure 30: Mintel’s COVID-19 exposure anxiety and lifestyle impact index, 28 February 2020-22 April 2021
- Travel, leisure and clothing have seen the biggest falls in spending
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- Figure 31: Planned and actual financial activity, February 2020 vs March 2021
- Hygiene concerns and home dining boost household care and food
- Figure 32: Changes to spending habits since the start of the pandemic, 1-12 April 2021
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COVID-19 and Working Patterns
- Furloughs have been concentrated among unskilled roles
- Figure 33: Impact of COVID-19 on employment and working patterns, February 2021
- Younger, unskilled workers have been hit hardest by job cuts…
- Figure 34: Agreement with the statement “I have lost a job (ie been made redundant or left a job for a reason that was not your choice)” since the start of the COVID-19 outbreak, by age, February 2021
- …while casual workers have lost the most hours
- Figure 35: Agreement with the statement “I have reduced the number of hours I work” since the start of the COVID-19 outbreak, by type of working contract, February 2021
- Working mums have been put under greater strain
- The jobs market slowed down sharply last year
- Remote working is changing our cities…
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- Figure 36: Agreement with the statement “I have started to work from home/increased how often I work from home” since the start of the COVID-19 outbreak, by home region, February 2021
- …and could have significant implications for employers and workers
- Furloughs have been concentrated among unskilled roles
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Future Employment Plans
- A third of employees expect to look for a new job in the next year
- Figure 37: Likelihood to look for a new job in the next 12 months, by age, February 2021
- Money is the biggest driver for job moves, but wellbeing is a key consideration
- Figure 38: Reasons to look for a new job in the next 12 months, February 2021
- A third of employees expect to look for a new job in the next year
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COVID-19 and Income
- Most incomes have remained stable despite the pandemic
- Figure 39: Impact of COVID-19 on personal income, February 2021
- A squeezed middle
- Figure 40: Impact of COVID-19 on personal income, by age, February 2021
- The pandemic has deepened income inequality
- Figure 41: Impact of COVID-19 on personal income, by household income, February 2021
- Most incomes have remained stable despite the pandemic
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COVID-19 and Savings
- Two fifths have at least £5,000 saved, but one in six have nothing
- Figure 42: Value of savings and investments, February 2021
- A third have grown their savings since the start of the pandemic
- Figure 43: Changes in levels of savings since the start of the COVID-19 outbreak, 4-12 March 2021
- Easy access savings have enjoyed the biggest boost
- Figure 44: Impact of COVID-19 on the value of savings in different products, February 2021
- Two fifths have at least £5,000 saved, but one in six have nothing
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COVID-19 and Household Debt
- One in eight have applied for a payment holiday on unsecured credit
- Figure 45: Impact of COVID-19 on consumer credit, February 2021
- Mortgage holidays have been widespread, but arrears are still rising
- Figure 46: Impact of COVID-19 on consumer credit, February 2021
- One in eight have applied for a payment holiday on unsecured credit
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COVID-19 and Household Spending
- Two thirds have cut back on non-essential spending
- Figure 47: Impact of COVID-19 on household spending, February 2021
- Spending curbs most common amongst less affluent
- Consumers are most likely to have put off a holiday due to COVID-19
- Figure 48: Major purchases that consumers have put off as a result of COVID-19, February 2021
- Many have put home ownership dreams on hold
- Figure 49: Percentage of consumers who have put off a major purchase who have put off buying a home, by housing situation, February 2021
- Concerns over COVID-19 and education balanced by a challenging job market
- Figure 50: Percentage of consumers who have put off a major purchase who have put off training/education, by age, February 2021
- Car sales are set to rebound but will be affected by changing habits
- Two thirds have cut back on non-essential spending
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Post-pandemic Priorities
- Holidays top consumers’ post-COVID goals…
- Figure 51: Financial priorities when COVID-19 is no longer a concern, February 2021
- …especially among the over-55s
- Figure 52: The impact of COVID-19 on household finances – CHAID – Tree output, February 2021
- Getting back to the small things is also highly valued
- Figure 53: Spending priorities when COVID-19 is no longer a concern, by age, February 2021
- Saved up and ready to spend
- Figure 54: Spending priorities when COVID-19 is no longer a concern, by value of savings and investments, February 2021
- Some savings habits will be retained
- Figure 55: Saving priorities when COVID-19 is no longer a concern, by current financial situation, February 2021
- Holidays top consumers’ post-COVID goals…
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Appendix – Data Sources, Abbreviations and Supporting Information
- Abbreviations
- Consumer research methodology
- CHAID analysis methodology
- Figure 56: The impact of COVID-19 on household finances– CHAID – Tree output, February 2021
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- Figure 57: The impact of COVID-19 on household finances – CHAID – Table output, February 2021
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