COVID Impact – 3.6 Million Worried About Paying Bills
In a recent survey by Go Compare, it was found that 3.6 million people in the UK are worried they may not be able to pay their bills. The impact of COVID has led to widespread redundancies, which has had a direct effect on family finances, leaving 8% of the UK seriously worried about their future and 7% concerned they won’t be able to pay their bills. Recent measures announced by the Prime Minister in response to the threat of a second spike in the virus make the UK’s economic outlook look bleak for the most vulnerable.
Go Compare found that UK households have responded by cutting back on their outgoings. On average, families were able to save around £95 per month by reducing the type of food they bought in supermarkets, cutting down on takeaway meals and using loyalty or cash back schemes.
Over 2000 UK adults were sampled in the online survey, which is representative of the UK population. The survey focused on the outgoings of each family; however, no indication was given to the level of debt each person questioned had and whether this remained affordable.
The survey identified money saving tactics could have totalled £3.5 billion saved per month in the UK, with an average monthly saving of £95. Just a fifth of people answering the survey said they could have reduced their monthly outgoings by more than £100.
However, the question remains; of those people who have been struggling to pay their debts, have they seen a reduction in income as a result of being on furlough or been made redundant? The Guardian reported that UK consumers repaid a record, £7.4 billion of debt during lockdown, but for those without disposable income this hasn’t been an option. Coronavirus has resulted in the most vulnerable in society being required to use what little money they have and to take on more debt.
On 14 July 2020 Matt Mckenna, head of UK communications at finder.com, published an article on UK debt. The article highlighted that 318 people are declared insolvent or bankrupt daily and that up until February 2020 Citizens Advice dealt with 2618 new debt problems every day.
UK businesses have been pushing for the government to extend the furlough scheme, with little success and it is widely expected that the UK will see the highest levels of unemployment since the 1980s.
What does this mean for those who have debts and are no longer able to afford to service them?
This question now applies to both the most vulnerable in society as well as those who have recently lost their jobs or have suffered a significant loss of income and are now struggling to find new employment.
The UK debt industry is bracing itself for a rise in insolvency cases. With recent measures reversing the trend of returning to the workplace with further limits on hospitality opening times, group sizes and the increasing number of local lockdowns, the UK is braced for a challenging autumn and a very hard winter that could see many people losing thier income.
So, what does the future hold? There are some inescapable facts that will have a direct impact on the lives of families in the UK struggling to pay back their debt. Massive government debt may lead to tax increases in order to support Treasury revenues and widespread unemployment could result in more consumers struggling with debt. It is believed that insolvency firms and debt management practises will see the highest levels of consumers looking for ways to manage their debt problems.
Volume IVAs are already being seen to offshore many administrative functions in a drive to maximise profits, however regulatory and reporting functions will still require manual assessment. For the mid-market and small practises, the increase in caseload may be seen as welcome new business. However, these companies are not set up for growth and may take on large caseloads that their staff will struggle to process and manage over the 60 months duration of the IVA.
UK population will need the support of insolvency firms, but are they set up to meet the demand over the next 12 months? There is a range of insolvency software platforms that can help firms manage their cases, yet despite this technology insolvency teams are still left to analyse paper bank statements without the support of automation technology.