Coronavirus- the lasting financial impact
Commentary | 15/04/21
We are now more than a year into the Covid-19 pandemic, and I think it is safe to say that none of us predicted the impact it would still be having on our lives.
With lockdown easing in the UK, on the back of the vaccine rollout, we are all starting to think about making plans about how we move beyond the pandemic. If things go to plan life could be back to some kind of ‘normal’ by the end of June in terms of restrictions.
But it is becoming clear that there will be a long-term impact on the financial situation of many individuals and firms alike.
In recent weeks there have been the publications from both the Financial Conduct Authority (FCA) and the Money Advice Trust (MAT) looking at the impact of Covid-19 on finances and the assistance customers will need moving forward.
The MAT research showed that a third of adults in Britain (31%) now report being financially worse off as a direct result of the pandemic. Additionally, over 10m adults are worried that their finances will not recover from the impact of Covid-19.
Unemployment is now at its highest point since the start of 2016. We know that a large number of households in the UK have little or no savings to help deal with financial shocks. For many that have lost their employment, or suffered a change in circumstances, things will take longer to recover than a few more months, possibly years.
Recently, the FCA reviewed the implementation of its tailored support guidance for Covid-19 and the readiness of firms to help customers in financial difficulty. This included customers who had come to their end of their payment deferral, as well as those that had not used one.
The FCA’s research found that customers were generally able to access additional support at the end of a payment deferral, with firms allocating additional resource to this. The FCA did note that there been an increase in inexperienced staff assisting customers, which may lead to an increased risk of harm.
Firms were reminded of the outcomes of the tailored support guidance, particularly that: customers receive appropriate forbearance that is in their interests after consideration of their individual circumstances; and that firms support their customers through a period of payment difficulties and uncertainty, including by considering their other debts and essential living costs.
The call was for senior managers to consider every aspect of support for customers. That by this stage, the expectation is that there would be a carefully considered process rather than the rapid reaction required early on in the pandemic.
By now, and as we move to more tailored support, the FCA expects an approach that has been considered at the firm’s highest levels and understood on the frontline. The test used by regulators is to see evidence of discussion and to ensure that it can be explained by everyone involved. The FCA mentioned that there should also be quality management to ensure that everything works as planned.
We know that the FCA has a firm focus on vulnerability currently. The pandemic has meant many more people are at risk of vulnerability, so the focus on dealing with this cohort is likely to grow.
Firms will need to ensure that they help consumers through this change and continue to provide tailored support. Vulnerability remains a priority issue for the CCTA and we will be developing more materials and events on the topic for our members in the coming months.