Nearly 3m households who lost income due to the coronavirus pandemic unprotected - receiving no government support

25 June 2020

A new report published today by Standard Life Foundation found one in ten (nearly three million) UK households were left (or likely to be left) without financial support from the government when their incomes fell due to the pandemic. Of those who did not benefit from the income support schemes (furlough and self employment income support (SEISS)), 90% did not benefit from Universal Credit either.

Analysis of the households that had earned income protected by either the furlough or the SEISS found that two million were very likely to suffer further income losses in the next few months, with one million saying that it was very likely they would experience job loss or have to cease trading, and one million that they would experience a drop in earnings. A third of them ( 35% ) were using credit to pay for essentials, suggesting the drop in income is leaving many financially exposed at a time when a jobs crisis is looming.

Researchers analysed data from a YouGov poll of 6,500 people commissioned by Standard Life Foundation as part of its regular Coronavirus Financial Impact Tracker.

There are several reasons why employees had failed to have their earnings covered by the furlough scheme. These included: job loss and working reduced hours or on reduced pay, but also new employees that were not already on the payroll on the cut-off date of 19 March. Self-employed householders who fell outside the SEISS included those who: were deriving less than half of their income from self-employment; had trading profits that were above £50,000 in previous years, or were newly self-employed and had not, therefore, filed the tax returns needed to qualify.

Prospects for households in this group appear fairly bleak, with two-thirds (65%) thinking it is likely they will suffer a further loss of income over the next three months or so - four-in-ten (39 per cent) thinking it very likely.  This included 25% who thought it very likely that they would be affected by job loss or having to cease trading and 14% that they would have a further drop in earnings.

Self-employment is a key factor. A significant number received income from self-employment in February (prior to lockdown), (41 per cent of such households) – nearly three times higher than the rest of the sample. And 1 in 5 (19%) worked in the gig economy. They included disproportionate numbers of households with a householder working in the construction, education or arts and entertainment sectors. A relatively high proportion (30 per cent), were in the ‘AB’ social grades, and over half (54 per cent) had a degree – considerably higher than the other households who had seen a drop in income but received protection or part-protection.

In more positive findings, around 8.7 million households have benefitted from government help. Around 4.2 million households who have benefitted from the furlough or self-employment scheme have had their earnings topped up by their employers, meaning they have seen no reduction in income.

Mubin Haq, Chief Executive of the Standard Life Foundation, said:

“It is commendable that the government acted quickly to protect millions of household incomes at the start of the pandemic. However, many more people than previously estimated are falling through the cracks, and this number is likely to grow if redundancies increase once the employer contribution to the furlough scheme begins in August. Now is the time to fix the broken safety net to prevent more households falling into hardship. Nearly three million families are receiving no support and they are feeling abandoned as they are not eligible for support.

“We are calling on the Government to iron out some of the hard edges to its policies and fill in the gaps. In particular support for the newly self-employed and addressing eligibility rules in relation to income and trading thresholds.”

Alistair Darling, Chair, Standard Life Foundation, said:

“Some of the families who have not been protected will be able to rely on savings but many are already struggling to pay for essentials such as food. Given that we have a looming jobs crisis and four in ten have savings of less than £500, the report makes for worrying reading.

“As the job retention schemes end there is a real risk of 1980s levels of unemployment with millions facing a dramatic loss of income. The Government must put in place measures to get people back into work and to support families who will desperately need support. We need to prepare now.”

Download the report