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IPPR - Winter Covid debt warning: young people, ethnic minorities, and renters at most financial risk

Think tank reveals 10 per cent were behind on bills before pandemic hit and people expect a one in seven chance of falling behind on bills

Cruel irony as many of those most vulnerable to Covid-19 are also most at risk of facing financial hardship due to the pandemic

Yesterday the progressive think tank IPPR warns that problem household debt in the UK could rise significantly as a result of the Covid-19 pandemic. In a new report, the think tank argues that the economic shock caused by the pandemic could turn many people’s manageable debt into problem debt or force households to increase borrowing unsustainably.

The think tank warns that Covid-19 has pushed some people who were ‘just about managing’ on a tight budget to a point where they are now ‘just not managing’.

Recent studies show that in the three weeks following the March lockdown around 7 million households had lost all or a substantial part of their income due to the pandemic, with 11 per cent reporting being in serious financial difficulty. By May 14 million people had experienced a direct negative impact on their income, according to StepChange Debt Charity.

The report says unemployment, furlough or unexpected costs due to the pandemic all have the potential to turn sustainable consumer debt into a major burden for families and individuals, with severe consequences for wellbeing and mental health.

Household debt levels were rising prior to the pandemic; 27 per cent entered the pandemic holding consumer debt and 10 per cent were behind on their bills. During the crisis, people surveyed expect a one in seven chance of not being able to pay their usual bills on average, according to IPPR analysis.

The report identifies striking variation in levels of indebtedness and financial difficulties across age groups, ethnic groups, housing tenures, regions, and income groups. 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 analysis found:

  • Young people aged between 16 and 29 were over twice as likely to have lost their jobs or stopped working than the average during the pandemic. Of those aged 18 to 29 employed in Jan/Feb, 10.5 per cent were unemployed or otherwise out of work by June. Across all age groups it was 5.1 per cent. Young people’s jobs are most heavily concentrated in sectors impacted by Covid-19 restrictions.
  • Ethnic minorities are twice as likely to have lost their jobs or stopped working during the crisis than white people. People from black, Asian and other minority ethnic communities were also more likely to face financial difficulties before the crisis and are more likely to expect difficulty paying bills during the crisis (between 27 and 34 per cent, compared to 14 per cent across all groups).
  • Renters and mortgage-holders are more likely to hold debt, more likely to 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. Food services and hospitality are among the lowest paying sectors as well as being impacted most by restrictions.
  • Those with long-term health conditions or a disability are also more likely to live in households behind on bills and they have higher expectations of experiencing financial difficulty during the pandemic.

Researchers note the ‘cruel irony’ that some of those most vulnerable to the health effects of Covid-19 are also the people most at risk of financial hardship.

Regional disparities

The report also reveals the stark regional variation in the risk of financial hardship. Higher pre-pandemic debt levels, coupled with low average incomes and tough local restrictions means people in the North East and East Midlands are most at risk of problem debt, according to the report. For example, 32 per cent of people in the North East had some kind of debt pre-pandemic compared to 27 per cent across all regions. People in London were more likely than people in other areas to report struggling financially and being behind on bills before the crisis (16 per cent of people compared to 8 to 11 per cent across other regions) – potentially linked to higher housing costs – but have relatively low consumer debt levels.

Median total debt to annual income ratios among borrowers were highest in Scotland and Northern Ireland, though Yorkshire and the North East were close behind, according to the report.

Helping households in debt

IPPR recommends urgent action to address the impact of the pandemic on household debt as well as long-term action to prevent problem debt occurring. Measures include:

  • 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. A place-based approach means leaders can tailor measures to reflect the needs of the community, whether that be more face-to-face financial advice, initiatives to promote early referrals of problem debt sufferers or campaigns to promote financial literacy.
  • Improved communication – information about debt and affordability should be in clear plain English, without impenetrable jargon. We recommend that the FCA (building on its work on vulnerability) collaborate with expert stakeholders to develop best practice guidelines.
  • 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. Digital inclusion efforts should encourage the use of new technologies that increase financial literacy, give people access to high quality debt advice and expand access to open banking services. This should build on the Open Banking for Good initiative, supported through collaboration between business, civil society and government departments.
  • 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. 

Anna Round, IPPR North Senior Research Fellow, 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.”

Shreya Nanda, IPPR Economist, said:

“People get into problem debt for different reasons. Some argue that overspending and poor budgeting are the cause, but the reality is that an increasing number of people simply do not receive enough income to cover the costs of daily life, even when it is lived very frugally. Now Covid-19 threatens to push even more people into problem debt through no fault of their own.”


  • Robin Harvey, Digital and Media Officer: 07779 204798
  • David Wastell, Head of News and Communications: 07921 403651
  • Anna Round, Shreya Nanda and Lesley Rankin are available for interview


  1. The IPPR paper, Helping households in debt by Sarah Longlands, Shreya Nanda, Lesley Rankin and Anna Round is available for download at:
  2. IPPR analysed survey data on individuals’ financial situations before and during the Covid-19 crisis. This data was drawn from the Understanding Society survey, a major UK household panel survey. Data for the pre-Covid period is taken from waves 8 and 9, which cover the period January 2016 to June 2019. Data for the period during Covid is taken from waves 2 and 3 of the Understanding Society Covid-19 survey, a special survey undertaken during May and June 2020, at the height of the first phase of the pandemic. 
  3. IPPR’s Centre for Economic Justice was set up in 2019 to widen and deepen the work of the Commission on Economic Justice. The Commission’s final report, Prosperity and Justice: A plan for the new economy, is available to read and download here
  4. IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence.
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