Covid-19
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Living standards
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Incomes

Caught in a (Covid) trap

Incomes, savings and spending through the coronavirus crisis

Karl Handscomb
Karl Handscomb
Lindsay Judge
Lindsay Judge

In this briefing note we examine how the family finances of working-age adults have been affected since Covid-19 gripped the nation this spring. Drawing on new data from a representative survey of 6,000-plus working-age adults fielded in mid-September, we take a close look at how incomes, spending and saving changed during both the lockdown (April to June) and re-opening (July to September) periods.

What emerges is a complex picture of winners and losers across the population. There are families who have increased their saving in the crisis; others who have had big incomes falls but been protected by policy; and still others that have fallen through the cracks. As we enter the winter months and a second lockdown, this note provides a clear case for further income support if significant hardship is to be forestalled.

Key findings

  • Pressure on incomes has eased slightly since the lockdown period (April-June). Nonetheless, we find that in the re-opening period (July-September), 23 per cent of working-age adults reported their family income was lower than in February this year.
  • Four-in-five (81 per cent) of those managing on a lower income in the re-opening period had already seen their income fall in lockdown, indicating that for many, the pandemic living standards hit is not proving short-lived.
  • Policy action has gone some way to protecting families from the sharpest incomes falls. However, benefits are a far from adequate substitute for earnings. We find 43 per cent of adults in families making a new claim for benefits since February have seen their incomes fall by more than one-quarter.
  • While there has been a weak spending recovery since lockdown, 25 per cent of adults still reported spending less in the re-opening period than they did in February. Moreover, lower spending is increasingly born from necessity rather than lack of opportunity.
  • There is evidence that serious financial stress is building among a minority as the pandemic continues to dominate lives. Half (54 per cent) of adults from families in the lowest income quintile have borrowed in recent months to cover everyday costs such as housing and food.
  • Likewise, we see warning signs from those who have been managing on a reduced income for several months. Almost one-in-three (29 per cent) adults that has had a persistently low income through the pandemic say they cannot afford basic items such as fresh fruit and vegetables every day, or to turn on the heating when required.

Further reading

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Karl Handscomb
Karl Handscomb
Lindsay Judge
Lindsay Judge Research Director