Holidays and Home Improvements on Hold as Consumers Cut Back on Spending Despite Growing Confidence
As the UK lockdown eases, there are some positive indications that the financial shock of COVID-19 is also abating, according to TransUnion’s study tracking the impact of the pandemic.
The latest research* from the global information and insights provider shows over a quarter (27%) of UK households now do not expect any future financial impact as a result of the pandemic, almost double the figure (14%) when the study began in March.
This demonstrates the steadying effect that the support schemes and provisions in place have had, with one in five (20%) households having received a form of financial forbearance from their finance provider, most commonly for personal loans and mortgages.
Nearly half (49%) have cut back on discretionary spending to help them navigate their way through the pandemic, with the research showing nearly six in 10 (57%) people are delaying holidays and over a quarter (26%) are putting off home improvements.
Kelli Fielding, managing director of consumer interactive at TransUnion in the UK said: “Our research confirms that the initial shock has now subsided and that’s thanks in part to the support that’s been offered to consumers. However, with seven in 10 of those impacted still worried about their ability to pay bills – with credit cards, utilities and rent payments causing most concern – it’s no surprise that discretionary spend has been cut. As a result, consumers have limited means to support the government’s drive to reboot the economy as shops and restaurants reopen.”
Perhaps unsurprisingly, the study shows that younger consumers have been more willing to spend through the crisis, with fewer Gen Z’ers cutting back on discretional spending, but the data also highlights some worrying concerns for the future.
Brendan Le Grange, director of research at TransUnion in the UK explained: “Whilst it’s great to see an increase in consumer confidence, it’s important to be mindful of the long-term implications of this pandemic. Of those who have been financially impacted by COVID-19, over a fifth (23%) have cut back on their saving for retirement and one in 10 (11%) have actually dipped into their retirement savings to get by. As a result, even when their incomes return to pre-crisis levels, there’s going to be a significant dent in their finances that could affect their future means and ultimately their standard of living in later years.”
As we move into the latter half of the year, finance providers need to continue working closely with customers to help them maintain the best financial position possible. According to TransUnion, more than a fifth (21%) of consumers are hoping to extend the provisions in place for another few months, whilst four in 10 (41%) would like to structure their payment plans so they can catch up gradually while paying their regular monthly commitments.
*Based on a survey of 1,071 UK consumers conducted 3-6 July 2020 on behalf of TransUnion as part of its Financial Hardship Study