UK households suffer bigger income hit than in Germany and France – study

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Households in Britain hit by COVID-19 job losses suffered a much bigger fall in their incomes than in France and Germany where social security is more generous and incomes are more equal, the Resolution Foundation think-tank said.

Forty-one percent of British households where one person or more became unemployed saw their income fall by at least a quarter. Only 20% of newly unemployed households in France suffered such a large fall in income, while the proportion in Germany was 28%, the foundation said in a report.

Unemployment in all three countries rose relatively little last year, especially compared with during the 2008 global financial crisis, as government furlough programmes have encouraged businesses to keep staff on their books.

Those British households whose income fell were twice as likely to have taken on more debt during the pandemic to cover living expenses as German and French households.

Britain’s fast vaccine roll-out means its incomes crisis is likely to ease more quickly but the underlying weakness in its household finances is storing up risks for the future, Resolution Foundation economist Maja Gustafsson said.

“It’s vital that households’ financial position is strengthened as we finally emerge out of the COVID-19 crisis, so that they are less exposed when the next economic crisis comes along,” she said.

British finance minister Rishi Sunak announced on March 3 an extension of a COVID emergency top-up of 20 pounds ($28) a week to state benefits for low-income households, but only for a further six months.

One-in-three British households cut spending, compared with 23% and 21% in France and Germany, the foundation said, raising questions about the strength of the country’s economic bounce-back as the government lifts its coronavirus restrictions.

Britain’s big spending fall was linked to the country’s COVID-19 restrictions that have been tighter and lasted for longer than in France and Germany, as well as the weak state of household finances, the report said.

The Resolution Foundation focuses on issues affecting lower-income households. 

Photo: EPA-EFE/ANDY RAIN