By December this year more than 9 million Britons had to borrow more than they normally do while at the same time credit card balances actually fell by 14.7 per cent in 2020, according to figures from the ONS and UK Finance.
At the end of March 2020, 31.6 per cent of people said they would be unable to save for the year ahead, but this figure had increased to 38.4 per cent in December, according to the ONS.
But over £150 billion was saved into cash accounts last year, according to figures from AJ Bell, the Bank of England and NS&I.
AJ Bell financial analyst Laith Khalaf says: “There’s a pandemic paradox at the heart of personal finances in the UK with signs of both financial distress and excess savings at the same time.
“It’s clear that the young, the self-employed, and those on lower incomes have borne the brunt of the financial damage inflicted by the pandemic. But more affluent households with steady, undisturbed income streams have found themselves awash with cash, as spending options have been severely curtailed by ongoing lockdowns.
“It’s particularly telling that those on higher incomes who were furloughed were much more likely to be paid in full than those at the bottom end of the spectrum. Again, this paints of a picture of financial pressure falling on those least able to afford it.
“At the end of the pandemic then, we will be left with a wider divide between the have and have-nots. The government will likely seek to address exacerbated inequalities while also balancing the books, which probably spells higher taxes for wealthier households. Indeed, some surveys have suggested that higher earners are already willing to pay more to help pay back the cost of the pandemic.
“However. with the virus still in full flow, tax rises have probably been pushed back. It’s six weeks until the March budget, and while a lot can still happen in that time, the Chancellor will probably still be in spend and support mode until later in the year. At some point the bill for the pandemic will need to be presented to the taxpayer though, and those with more change in their pocket will probably be asked to contribute more.”