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Financial wellbeing of British households plummets despite government support

Joanna Faith
Written By:
Joanna Faith

British households say their finances are in the worst position since November 2011, despite government action to support people through the coronavirus pandemic.

The IHS Markit UK Household Finance Index, which measures households’ overall perceptions of financial wellbeing, plummeted to 34.9 in April, its lowest reading in eight-and-a-half years and a sizeable drop from 42.5 in March.

The data was compiled during the first week of April so gives an early indication of the impact on household finances from the public health emergency.

Job security perceptions also plummeted in April, despite unprecedented support from the government to support businesses and employees.

Yesterday, the government’s Coronavirus Job Retention Scheme went live, enabling firms to apply for grants to cover 80% of workers’ wages up to a monthly cap of £2,500. More than 140,000 companies applied for the scheme on its first day.

However, the survey found pessimism around job security was at a record high, with those working in media, culture and entertainment the most concerned.

On a positive note, there were no signs of immediate stress on household balance sheets in April. Debt levels were broadly stable when compared to March, while unsecured lending requirements rose at a rate that was below its long-run average as households dipped into savings.

Joe Hayes, economist at IHS Markit, said: “Unsurprisingly, financial conditions deteriorated sharply when compared to the previous month and at a rate not seen since November 2011. This was to be expected as workers have been placed on furlough and applications for universal credit have risen substantially in recent weeks.

“Even with the government’s scheme to backstop earnings, those in receipt of this will still be worse off as support has been pledged for 80% of their full income.

“Around one-in-three UK households reported a decline in income from employment during April, which was by far the largest number since the survey began in 2009.

“Nevertheless, we can still draw a small degree of positivity from the latest results, with overall measures of cash available to spend and household debt proving much more stable than workplace incomes.”