Almost 20 million people in the UK have lost an average of £538 ($753) in income every month since the start of the coronavirus pandemic.
The amount is nearly a full week of spending for the average household, according to the Office for National Statistics (ONS), and equates to a total of £11bn nationally.
Research from smart money app Yolt, showed that two out of five UK adults (38%) have experienced a negative change in their financial situation as a result of the health crisis, such as a pay decrease or job loss.
Meanwhile, more than half (51%) of UK consumers have not taken steps to protect themselves against a potential financial shock, including a sudden change in income, or a shift in their finances that would mean they couldn’t cover their usual outgoings.
The study also found that 19% of people surveyed had seen their income decrease and one in ten (11%) have been furloughed during the pandemic.
In responses to these changes, over a third (34%) have dipped into their savings and a quarter have turned to credit card spending (26%). One in five people who experienced a financial shock (20%) tried to raise money by selling things online and one in seven (16%) borrowed money from their family.
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Experiencing a financial shock makes people much more likely to put precautions in place in the future, Yolt said.
Amongst all UK adults, these preventative steps included, reviewing their monthly outgoings to see where cutbacks can be made, putting money aside in a rainy day fund, and a focused approach to paying off debts to help ease financial pressure.
A quarter of Brits (25%) said that the pandemic has made them finally look to tackle their debt as recent Bank of England (BoE) data found that UK households repaid a total of £16.6bn on credit cards and loans last year.
Pauline van Brakel, chief product officer at Yolt, said: “There is no uniform financial experience or response to the current economic climate and we’re unfortunately seeing a widening wealth gap, with some people able to save during this period, as the opportunity to spend has declined, and other people unfortunately having suffered a significant reduction in income.
“With the UK still experiencing great levels of uncertainty there could be further financial shocks on the horizon for many – especially with government support schemes such as furlough due to come to an end in the coming months. It’s no doubt a challenging time for all but engaging with your finances and looking to see where you could make cutbacks to save even a small financial cushion can be a lifeline if you do experience a financial shock."
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