That’s the conclusion of a new report from the Resolution Foundation, which compared the financial impacts of Covid-19 on the UK, France and Germany on individual households.

It noted that typical household incomes were broadly similar in the year before the pandemic ‒ in the UK, the average annual salary stood at around £29,300, while in France and Germany it was around £29,200 and £29,700 respectively.

However, the greater levels of financial inequality in the UK means that our poorest households have lower incomes ‒ 20% below those of the poorest in France for example ‒ while there is less of a safety net in the form of both social security and personal savings. Research before the pandemic found that millions had no savings at all.

And that has meant a bigger financial impact. The Resolution report found that among households where at least one person has lost their job, more than two in five (41%) of households in the UK have suffered an income fall of at least 25%. That’s twice the level in France (20%) and sharply higher than the 28% of German households that have seen such a severe income shock.

Borrowing more to get by

This has led to far more UK households cutting back their spending. A third of households here have reduced their outgoings, compared to less than one in four (23%) in France and around one in five (21%) in Germany.

As well as reducing spending, households in the UK are also much more likely to have taken on debt in order to support their finances. The study found that around 17% of households here have borrowed in order to cover living expenses, around double the proportion of German (9%) and French (8%) households.

Previous research has suggested that as many as three million extra people will spiral into debt this year due to Covid.

Be prepared

Maja Gusrafsson, economist at the Resolution Foundation, said that there were big differences in the levels of “financial resilience” between UK households and those in France and Germany, with less in savings and a less generous benefit system in place to provide support during difficult times.

She added: “These holes in UK households’ financial resilience have been exposed during the Covid-19 crisis. They are far more likely to have suffered a major living standards hit than French and German households, and are far more likely to have taken on debt to cope with these financial shocks.

“It’s vital that households’ financial position is strengthened as we finally emerge out of the Covid-19 crisis, so that they are less exposed when the next economic crisis comes along.”