Even before the COVID-19 outbreak, our research showed that UK consumers were facing multiple financial challenges and were worried about their financial situation. To understand how the pandemic has so far impacted consumer finances and behaviors, we surveyed 1,118 UK online adults in April 10–15, 2020 and found that UK consumers:
- Are already feeling the impact of COVID-19 on their finances. Thirteen percent of UK adults have seen their income (hours and/or wages) reduced due to COVID-19. This is impacting their ability to spend and meet financial commitments: Around half have reduced spending to the minimum, and 10% have missed a bill or loan payment. This spells trouble given that, even before the crisis, a quarter of consumers said they felt overwhelmed by debt.
- Have become much more anxious about their financial situation. The number of people who are anxious about their financial situation has more than doubled, from 16% before COVID-19 hit to 37%. Our data shows that older generations are feeling more confident due to less debt and their reliance on pensions, while Millennials and younger adults, people with dependent children, and those who have been laid off are worrying more about their financial future.
A while ago, we identified sustainable finance as a new imperative to respond to the ever-increasing number of values-based consumers. Now more than ever is the time for the financial services industry to take a more proactive approach and help customers who are struggling financially, offering them tailored solutions that improve their financial well-being.
Banks also have their own battle to fight, however, given that customers’:
- Depleted finances are chewing up banks’ profits. The crisis has forced banks to commit almost three times more money to bad loan provisions, which has impacted first-quarter results. HSBC reported a 49% drop in year-over-year after-tax profit for Q1 2020, with a similar drop of 58% at the Royal Bank of Scotland, a 60% drop at Lloyds Banking Group, and a drop of 32% at Barclays.
- Spending behaviors will reduce transactions and alter credit demand. Around a quarter of UK adults have delayed major purchases, and 14% have postponed major life events because of COVID-19. As customers hit pause on big-ticket items and are forced to delay marriage or postpone a home purchase, banks will feel the impact through reduced demand for loans and mortgages and will need to fight for deposits as consumers tap into savings to finance day-to-day purchases.
You can find our research on the financial impact of COVID-19 on UK consumers here. For the latest insights and guidance on how to address the growing business and employee experience implications of COVID-19, please check our public content page here, where you will find our forecasts and advice on how companies should respond to the crisis now while at the same time thinking strategically about the longer-term impact of the pandemic.
In addition, we are also currently developing planning tools that will help financial services firms navigate three economic scenarios we are forecasting around COVID-19. Stay tuned!