U.K. Households Took a Bigger Pandemic Hit Than Top EU Nations
U.K. households took on more debt and suffered a bigger hit to incomes during the pandemic than those in France and Germany, according to new research that indicates weakness in the potential for an economic recovery.
The findings, released by the Resolution Foundation, fuel the debate over the government’s handling of the crisis after the U.K. had both one of the highest death rates and the deepest slump among Group of Seven nations.
While the U.K. spent more than 300 billion pounds ($420 billion) supporting workers through the crisis, 41% of those in households where at least one person was out of work suffered a severe drop in income. That was double the level France experienced an significantly higher than the 28% rate in Germany. A third of British households cut back their spending, at least 10 percentage points above the equivalent figures in the top two European Union economies. Those in Britain were twice as likely to have taken on debt for living expenses.
“This big spending fall in the U.K. is likely to be due in part to households experiencing bigger income losses and having fewer savings,” the report said. “But even more important is the fact that the U.K. has faced economic restrictions that have been tighter and longer lasting.”
Higher inequality levels before the pandemic started meant the U.K.’s poorest households had lower incomes than their peers while the government offers fewer benefits as a social safety net, Resolution said.
©2021 Bloomberg L.P.