The coronavirus outbreak has sent a shockwave through the finances of millions of people in the UK. The effect has not been universal, nor has it been equal. Your age, your job, where you live, and the pre-virus state of your finances will all make a difference to how well you can cope. For a start, there has been the effect on income. For those who work, the amount of money coming in depends mostly on their wages.
Millions of people have taken a pay cut as the outbreak has seen more than nine million people being laid off work but paid by the state to stay in their jobs by being placed on furlough. The government, to date, has paid 80% of someone on furlough wages. However, not every employer can afford to top this up. That has meant a 20% pay cut for millions of people. Some may have had bigger cuts, as the scheme pays only the first £2,500 of the monthly wage.
Young people are most likely to have been in jobs to have been furloughed, according to data from HM Revenue and Customs, by working in sectors such as hospitality, tourism and leisure, while those in their 40s and 50s were least likely to have been put on the scheme.
Many employers may find it hard to keep on staff as the furlough scheme is gradually removed. The extra cost may prompt them to cut jobs, even though the government has promised a £1,000 bonus in January for each furloughed worker they keep on.
The self-employed have their own government support, and it has been used by 2.7 million people, but again it has meant falling income for many and it will not last beyond the summer. Then there are those whose work has dried up or who have lost their jobs.
The last recession amid the financial crisis of a decade ago showed that it is young employees who are most at risk of unemployment. Chancellor Rishi Sunak has said the UK is entering one of the most severe recessions this country has ever seen, so as it bites, jobless levels could end up worse than last time with young people being worst affected again. The outlook for them is highly uncertain.
Those of working age on low incomes, or who have lost their jobs, have needed to claim benefits. For those claiming for the first time or after a period without benefits, that is likely to be universal credit. As lockdown took hold, so the applications shot up and hit record highs from late March.
With less money coming in, there is pressure on people's ability to pay out. Again, this is likely to hit the youngest the hardest. They have less in savings and need to spend more of their money on essentials, such as rent. Overall, households have saved money during lockdown thanks to not being able to spend on non-essentials, such as holidays and eating out, but it tends to be older households that would have saved the most as they are able to spend a bigger proportion of their money on these items, and during lockdown they have simply been unable to do that.
On average, this is positive, but the general picture masks the fact that those who really need something to fall back on in a crisis may not have any savings at all. One big question is whether those with the extra savings will now go out and spend the money to help boost the already fragile economy.
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