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Debt Awareness Week: Average Brit brought £9,246 debt into 2021

More than half of UK adults started 2021 in debt, and one in four claim that debt was a direct result of the COVID-19 pandemic, according to new research.

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  • One in four UK adults said the pandemic pushed them into debt 

  • Almost £10 billion of personal debt directly caused by furlough reducing incomes 

  • Furloughed employees saw debts rise by £1,050 on average as a result of loss of salary

  • More than a third (36%) of the debt accrued last year in London has been linked to the COVID-19 pandemic 

  • 25-34s are the age group that took on the most debt into 2021 

  • Coronavirus Debt Index uncovers the impact of coronavirus on personal finances across the UK

More than half of UK adults started 2021 in debt, and one in four claim that debt was a direct result of the COVID-19 pandemic, according to new research.

As Debt Awareness week 2021 (22nd-28th March) starts, research by personal finance experts at money.co.uk has revealed that 51% of UK adults got into debt in 2020 with half of that new debt directly caused by the pandemic. The average amount of debt owed in the UK at the beginning of the year was £9,246 a person. 

Crucially, more than one in 10 people said their new debt was caused by reduced income resulting from being put on furlough, according to the money.co.uk Coronavirus Debt Index.

And that has meant one in every five UK adults have had to take out additional debt management products to pay off the debt caused by the pandemic.

James Andrews, personal finance expert at money.co.uk, said: “There is still a massive stigma when it comes to debt in the UK, with many being too ashamed to ask for help. But those struggling should realise they are not alone - this is a problem that affects huge numbers of people, with our research revealing that just 22% of adults started 2021 debt-free.

“2020 was a year like no other, and it had a huge effect on the finances of everyday people, including debt and how they’ve managed it. We are going to continue to see the ramifications of such a turbulent year long after lockdown ends and businesses reopen, but it’s never too soon to start looking for help.” 

The research highlighted that more than 11% of new debt that came out of 2020 was down to workers being furloughed and having reduced incomes. With 9.4m UK jobs were furloughed at some point in 2020*, the cost of debt due to furlough is roughly £1,050 per furloughed employee - that’s £9.87bn of furlough debt incurred in the UK during 2020.

The story for workers who were furloughed was most bleak in the East of England, where 16.13% of all new debt is down to people having a reduced salary because of furlough, according to the data.

Elsewhere across the UK, the picture is similar. In Greater London 16.11% of all debt brought into 2021 can be attributed to furlough. In the North West 12.7% of debt can be attributed to workers being furloughed, and in South East 11.98% of all debt accrued is down to loss of salary for those who have been furloughed.

UK residents aged 25-34 brought the most debt into 2021 – an average of £12,819 each. And 36% of people age 16-24 have said they brought debt into 2021 due to the COVID-19 pandemic.

The COVID-19 pandemic in general has wreaked havoc with the nation’s personal finances. More than a third (36%) of the debt accrued in 2021 in London has been blamed on the COVID-19 pandemic.

Of those surveyed, one in five Brits planned on paying off their debt by consolidating the different debts they owe, but 44% of people say they don’t move debts to take advantage of better interest rates, meaning they could be missing out on opportunities to save money and pay off their debt sooner.

Those worried about debt can receive free and impartial advice from StepChange, the UK’s leading debt charity, who can offer the support needed to help get finances back on track.

In its recent ‘Coronavirus and personal debt: a financial recovery strategy for households’ report, the charity highlights that: “Compared to the Great Recession, households with low-to middle-incomes entered the present crisis more likely to be facing problem debt and struggling to pay for essentials.” 

StepChange has also created a 3 step plan, specifically designed to help give people a clear picture of how to manage their debt: https://www.stepchange.org/how-we-help.aspx

Sue Anderson, head of media at stepchange.org said : “We know that millions of people have seen a negative impact on their finances from Covid, and that the number of people in problem debt has risen dramatically over the pandemic period. If that’s happened to you, you’re not alone and help is available. 

“Before you turn to additional borrowing as an attempt to make ends meet, check out the free advice available from StepChange Debt Charity that could help you with a plan to get out of debt, and reduce the risk of a prolonged debt spiral. On the cusp of the charity’s Debt Awareness Week, it’s the perfect time to take the first step.”

For more tips and advice, visit the money.co.uk Covid Debt Index.

*Based on Statista research (https://www.statista.com/statistics/1116638/uk-number-of-people-on-furlough )

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