Laura Suter, head of personal finance at AJ Bell, comments on the latest figures from the ONS on the impact of the pandemic on household finances:
“These figures show that the wealth divide in Britain was stretched further during the pandemic, making the gap between the richest and poorest even wider. As the UK recovers from the economic shocks of the pandemic it will take poorer households longer to recover their earnings, shore up their savings and pay off the debt they’ve had to take on during the past 18 months.
“Low income households were hit with the double whammy of being more likely to see their incomes hit, by being furloughed or losing their jobs, while also have less ability to reduce their spending. Meanwhile, high income households were most likely to be able to work from home and keep the same salaries, while also saving lots more money by spending less.
“While the average household managed to reduce their weekly spending by around a fifth during the pandemic, this average figure masks the big divide between high and low income households’ experience of lockdowns. The lowest income households saw a 13% fall in their spending, while the highest earners cut their spending by 21%.
“Wealthier households tend to spend more of their money on travel, eating out, hotels and other social activities, all of which were off the cards during the pandemic. Holidays in particular were a big area where wealthier families saved money, with half of their reduced spending in the pandemic being down to the lack of international travel.
“High earners were also less likely to lose their jobs or be furloughed, as they typically have jobs that could be done from home. Meanwhile, just over two-fifths of low income households saw their income fall, with those earning less than £20,000 being three times as likely to be furloughed in the first lockdown than higher earners.
“The figures also lay bare how much harder young people were hit in the pandemic, with those under the age of 25 being more likely to be furloughed, while those under 35 were most likely to find keeping up with bills a heavy burden. By nature of being earlier on in their career, young people are less likely to have big savings and so have less of a cushion to fall back on.”
