The Covid crash: the devastating financial impact of Coronavirus

This pandemic is leaving hundreds of thousands of people in debt. On day one of our new series #ThePerfectStorm, ELL investigates the financial impact of Covid-19 on local people

In just over a fortnight the landscape of the UK has completely shifted, and the UK economy is in freefall. With the BBC reporting that Coronavirus could be just as impactful as the 2008 crash, it soon became clear that without government action, millions of British people will be left insolvent and destitute as the economy withers.

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Chris Magill was an independent financial advisor for 25 years and is looking on in dismay at the unprecedented world events. He disagrees that it could be as bad as the last recession. “It’s going to be a lot worse than 2008,” he says. “We are going to be in a deep recession and it’s going to take us a really long time to recover.”

“It’s going to take the stock market a long time to return to previous levels, there will be a lack of confidence in the market and a reluctance to invest,” Magill says. “People who have already invested will have seen the value of their shares and pensions portfolios decimated, and won’t have the confidence to invest again.”

But how will this affect the individual? Magill zooms in on people’s pensions pots, which will all be dramatically reduced. Also, “there is widespread concern about people going into new debt – I have already had an email from an energy supplier asking me not to cancel my direct debit, saying they would help out.”

Magill advises people to “weather the storm as best you can.” He says “use all the vehicles that you have available, get advice from bodies in your local area, take advice from the people in control of your rent, your utilities and your council tax. “

While there is a risk of previously financial healthy people now falling into debt, what about those already battling in the red? Total household debt in the UK stood at £1.28trillion for the period from April 2016 to March 2018, according to the Office of National Statistics (ONS). How will the people who live pay-cheque to pay-cheque fair when faced with lockdowns consequences of mass lay-offs, and un-payable rent?

Rhys is a 23-year-old journalist and photographer living in London who, in December, made the daunting move to become self-employed. March was looking to be a promising month for Rhys, one where he was likely to outperform his previous salary for the first time. But this all changed when COVID19 decimated life as we know it.  

“Staff writers are maintaining their roles covering any and everything that is easy and quick, with a good news-hook: the Coronavirus. While this is nothing new for the freelancer vs staff writer dynamic, there is absolutely nothing else going on for us to cover.” Rhys explains.

“Many publications are refusing any freelance pitches, and some are much slower than usual at paying invoices. One publication usually pays on time without fail, but now are two weeks overdue on a payment to me.”

His photography gigs have dried up, live reviews are naturally out of the question and the events he would cover – protests, gatherings, football games – don’t exist.  

As a renter in London, the nation’s highest renting capital, it leaves him with less income but with the same outgoings; council tax, bills and rent just as before. “As someone registered self-employed, but only for a matter of months, being able to claim universal credit is also near impossible… In short, I have no choice but to struggle… If you aren’t employed or established as a freelancer, you’re screwed.” 

ELL spoke to Rhys before the announcement of the self-employment support scheme. This scheme will allow you to claim a taxable grant worth 80 percent of your trading profits up to a maximum of £2,500 per month for the next 3 months. However, you are only entitled to this scheme if you have submitted your Income Tax Self Assessment tax return for the tax year 2018-19. It appears that Rhys (newly self-employed), and thousands like him, will slip through the virus wage safety net.

ELL caught up with Rhys after the announcement : “I feel left out in the cold…. I think while it keeps established people secure it really does not help those who are -in fact- more vulnerable and haven’t had a chance to secure frequent/stable gigs, let alone savings. I’ve taken up a lot of transcription work to supplement my income, and I’m lucky to have that.”

It appears that even universal credit is proving to be problematic for Rhys. “It doesn’t cover my rent, I’m under 25 so I’d receive £251.77/month, my rent (with tax) is over 3x that”. Rhys also feels a level of guilt for seeking it “I’m able to work, a Journalist should not need that resource, more vulnerable people do.”

In his address to the nation, on Tuesday 14th April, Rishi Sunak stated that the government “Must be very honest about the hardships that the country will face” and that the Government cannot save “every household, every business”. With new figures released that the economy could shrink by up to 35%, a great many people share Rhys’s concerns for their financial futures.

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