Encouraging indications of economic recovery continue to be tempered by new reports further detailing the heavy effects of the pandemic on a significant proportion of the UK’s households, according to the May 2021 Money Statistics, produced by The Money Charity.
As the year progresses, ongoing signs of recovery for the UK economy can be seen, with GDP growing by 2.1% in March 2021 and inflation picking up to an annual rate of 1.5% in the year to April 2021. Meanwhile real wages grew by 3.1% in the year to March 2021 and unemployment dropped by 121,000 in the first three months of the year.
The housing market in April 2021 was particularly strong, with the Halifax saying average UK house prices had risen to a new record high of £258,204. This is an especially tough challenge on first-time buyers, with prices having increased by 9.5% in total in the year to March 2021.
While signs of improvement are important, reports continue to emerge showing the severe economic impact on roughly 30% of the UK whose incomes fell and/or who lost their jobs through Covid-19 restrictions. 10.1 million people showed signs of financial distress in January 2021, with 2.4 million people having problem debt. A heavy proportion of these difficulties affected younger adults, with 36% of 18-24 year-olds reporting having a common mental disorder (CMD), such as anxiety or depression, in January 2021 (up from 30% pre-pandemic) and 45% using Buy Now Pay Later in the last year.
An uptick in indicators of debt difficulty is not, therefore, surprising. Citizens Advice centres in England, Scotland and Wales have reported a 53.9% increase in debt advice calls, with individual insolvencies in England and Wales increasing by 3.2% in the three months to April 2021, compared to the same period last year. Debt advice charities have persistently warned of a brewing household insolvency crisis.
Michelle Highman, Chief Executive of The Money Charity says:
“After so many months of difficulty, it is encouraging to see essential indicators moving forwards and improving. However, as a charity dedicated to Financial Wellbeing, our goal and vision is to see financial situations improving for people right across the UK. A wider economic recovery cannot truly be celebrated if it leaves behind the many heavily affected households.
“Alongside others, we are highlighting this brewing crisis and joining the calls for action to address it. Steps need to pressingly be taken by creditors, the Government and the FCA to ensure debtors are given sufficient time and support to get their finances back in order, post-pandemic.”
Other Striking Numbers from the May Money Statistics:
- 17% of UK households with a Covid-related income fall took on debt to cover living expenses, compared to 9% in Germany and 8% in France. (P4.1.)
- The Lowell Vulnerability Index for the UK increased by 6.4 points in Q2 2020, reflecting the impact of the first Coronavirus lockdown. (P4.1.)
- Citizens Advice Bureaux in England and Wales dealt with 1,673 debt issues every day in the year to April 2021. (P4.)
Get the full picture and many more fascinating facts about money in the UK in our monthly Money Statistics.
Notes to Editors
- For over 25 years, The Money Charity has been the UK’s Financial Capability charity. We proactively provide education, information, advice and guidance to people of all ages, to reach our vision of seeing everyone achieving Financial Wellbeing by managing their money well. We empower people across the UK to develop the skills, knowledge, attitudes and behaviours to make the most of their money throughout their lives. Find out more at https://themoneycharity.org.uk/
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