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Rising unemployment compounds personal debt crisis

Rising unemployment compounds personal debt crisis

Rising unemployment compounds personal debt crisis

New figures from the Office for National Statistics show that the coronavirus pandemic has sparked a sharp increase in unemployment. Latest figures show that 1.72 million people were without a job in November 2020, taking the unemployment rate over 5% for the first time in four years.

The same figures also revealed that there were more than 800,000 fewer employees on the payroll in December 2020, compared to February.

With coronavirus restrictions still in place, there is growing concern that joblessness could continue to rise, putting an added strain on finances when many are already struggling.

National polling conducted by debt advice charity StepChange in September 2020 found that 2.5 million people are facing a financial crisis due to the impacts of coronavirus, while the number of people in problem debt who have seen their income affected negatively by coronavirus has increased to 1.2 million people.

The StepChange data also shows that 5.6 million people are struggling to afford everyday essentials and that 33% of these people were borrowing to make ends meet, potentially creating more serious debt problems down the line.

While some families have been able to reduce their debt burden as they save money working from home, others have been pushed into serious financial problems. A new report by the Legatum Institute found that nearly 700,000 people in the UK had been pushed into poverty during the pandemic.

Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said: “One of the things that makes this financial crisis more serious than previous crises is that we had a lot more people that were already struggling at the start of the pandemic. In December 2019, 3.2 million people were already facing problem debt and a further 9.8 million were showing signs of financial distress.

“Some people have been able to pay down their debt during the pandemic because they’ve kept their jobs while also saving money on things like transport. But others have seen their income reduce or disappear altogether. The situation has got worse for many more recently because some national and local support schemes have been rolled back, putting additional pressure on struggling families.

“Without more support, we could be at the start of a much bigger personal debt crisis.”

For more information about personal insolvency services, speak to a member of the team today. Call: 0800 611 8888.