UK reports increase in emergency borrowing, debt crisis concerns grow

The UK is reporting a rise in emergency borrowing due to the pandemic, triggering worries that the country could be “sleepwalking into a debt crisis”.

Research by the debt charity Stepchange found that household borrowing and arrears linked to the coronavirus pandemic have soared 66% since May to £10.3bn.

According to the study, the number of people who are in severe debt has risen to 1.2m, with a further 3m risking falling into arrears after taking on extra short-term loans.

Phil Andrew, the charity’s chief executive, said: “This report paints a picture of a nation sleepwalking into a debt crisis. Despite a bold initial reaction to the pandemic, the government and financial services sector’s toolkit of responses has not evolved, and the result is a spiralling number of people being plunged into debt due to Covid-19. And the worst is yet to come.”

Research by the Joseph Rowntree Foundation and Save the Children over the summer found nearly two-thirds of hard-pressed families on Universal Credit borrowed money to get by.

It found 70% of families had had to reduce the purchases of food and other essentials, while half were late on rent or other household bills.

The Stepchange report found that 14.9m people suffered a hit to their finances in March as the country went into lockdown. Stepchange said that among this group, 7.1m had fallen behind on utility and council tax payments or borrowed to make ends meet.