A quarter of all 2020 personal debt caused by Covid-19
Over half of UK adults got into debt this year, with one in four revealing that their debt was a direct result of the Covid-19 pandemic, according to new research.
The study by personal finance experts at money.co.uk reveals that 51 per cent of UK adults got into debt in 2020 and half of that was new debt directly caused by the pandemic.
The average amount of debt owed in the UK in 2020 is GBP9,246 per person. But, crucially, more than one in 10 people said their new debt was caused by reduced income due to being put on furlough, according to the new money.co.uk Coronavirus Debt Index.
And that has meant one in every five UK adults have had to take out additional debt management products to pay off the debt caused by the pandemic.
Salman Haqqi, personal finance expert at money.co.uk, says: “2020 has been a year like no other. And this has had a huge effect on the finances of everyday people, including debt and how they’ve managed it.
“Our survey has shown that over 11 per cent of new debt in 2020 is down to workers being furloughed and having reduced incomes. Based on the fact that 9.4m UK jobs were furloughed throughout 20201, the cost of debt due to furlough is roughly GBVP1,050 per furloughed employee - that’s GBP9.87 billion of furlough debt incurred in the UK during 2020.”
The story for workers who have been furloughed has been most bleak in the East of England, where 16.13 per cent of all new debt is down to people having a reduced salary because of furlough, according to the data.
Elsewhere across the UK, the picture is similar. In Greater London 16.11 per cent of all 2020 debt can be attributed to furlough, the money.co.uk study shows. In the North West 12.7 per cent of all 2020 debt can be attributed to workers being furloughed and in South East 11.98 per cent of all debt accrued this year is down to loss of salary for those who have been furloughed.
Norwich is the city most affected by the furlough scheme in terms of its debt. Some 20 per cent of all debt accrued in the city has been blamed on workers being furloughed, according to the money.co.uk research. London is next, with 15.38 per cent of its debt being blamed on the effects of furlough, closely followed by Manchester, where 14.15 per cent of its 2020 debt has been caused by workers on furlough receiving a reduced salary.
UK residents aged 25-34 are the age group taking on the most debt into 2021 – an average of GBP12,819. And 36 per cent of people age 16-24 have said they are taking debt into 2021 due to the Covid-19 pandemic.
The Covid-19 pandemic in general has wreaked havoc with the nation’s finances. More than a third (36 per cent) of the debt accrued this year in London has been blamed on the Covid-19 pandemic.
In Northern Ireland, 32 per cent of 2020 debt has been caused by Covid-19, according to the data. The West Midlands has seen 29 per cent of debt caused by Covid and, in the East Midlands, the South West and Wales, 26 per cent of all this year’s new debt has been blamed on the pandemic.