LONDON, April 21 (AP): Households in Britain, especially poorer ones, are far more likely to have suffered a severe income shock during the coronavirus pandemic over the past year than their counterparts in France and Germany, a well-respected British-based think tank said on Wednesday.
The Resolution Foundation also said that households in the UK are also more likely to have run up more debt in response to the financial shockwaves emanating from the pandemic.
In a report, which was entitled “After Shocks” and was supported by US investment bank JPMorgan Chase, researchers said typical household incomes in the UK, France and Germany were broadly similar in the year before the pandemic but that higher levels of inequality and a weaker safety net meant the poorest fifth of British households entered the crisis in a weaker financial position.
“These holes in UK households’ financial resilience have been exposed during the Covid-19 crisis,” said Maja Gustafsson, an economist at the Resolution Foundation.
The report found that among households in which at least one person had fallen out of work, 41% of British households had suffered a severe income fall of at least 25%, substantially more than the 20% recorded in France and 28% in Germany. It also found that 33% of British households have cut back their spending, more than the 23% recorded in France and 21% in Germany.
The report also found that British households with an income hit were also twice as likely to have taken on more debt during the pandemic to cover living expenses than German and French households, with the proportion of households doing so at 17%, 9% and 8% respectively.
The foundation said the uneven impact of the pandemic on household finances was likely to last far longer than the pandemic itself, with a higher proportion of lowest-income households drawing on savings or taking on debt to support living standards compared with the highest-income households.
By several measures, the British economy suffered one of the deepest and most protracted recessions in the developed world in the wake of the pandemic, with the economy shrinking around 10% in 2020. Many blame that on the Conservative government’s repeated failures to back lockdown restrictions early enough, delays that have contributed to the UK recording more than 127,000 coronavirus-related deaths, Europe’s highest.
There are hopes that the rapid rollout of coronavirus vaccines in the UK and the gradual lifting of lockdown restrictions will see the economy make up some of that lost output this year.
Though the underlying safety net in the UK is relatively less generous than those in France and Germany, the British government has been credited with swiftly enacting financial support measures to help offset the impact of the pandemic, notably its job retention program that has helped keep a lid on unemployment. Under the program, which is due to expire later this year, the government has been paying the lion’s share of the incomes of those workers retained by firms during the series of lockdowns that have been imposed.