UK consumers are “feeling the financial pinch of the coronavirus” with March showing an accelerated deterioration in the financial health of UK households, according to new data published in the IHS Markit UK Household Finance Index (HFI).

The headline index from the survey, which measures households’ overall perceptions of financial wellbeing, showed a sharp drop in March to 42.5, down from 47.6 in February.

The HFI is a “diffusion index”, which is calculated by adding together the percentage of respondents that reported an improvement, plus half of the percentage that reported no change.

The latest index reached its lowest point since May 2019, and IHS Markit added that UK households were expecting financial wellbeing to decline further over the next 12 months – another marked difference from the positive outlook recorded in the previous month.

IHS Markit economist, Joe Hayes, suggested the index showed UK consumers were already “feeling the financial pinch of coronavirus”.

He said: “With the country on the brink of lockdown during the survey collection dates (12-17 March), surveyed households reported the largest degree of pessimism towards job security in over eight years. Major purchases are being shunned in response to the worsening outlook for financial wellbeing, while the survey data suggest that workplace activity fell at the fastest rate since 2009.

“The Government has promised to do ‘whatever it takes’ to keep the economy afloat and ensure UK households do not suffer financially, but there still remains a high degree of uncertainty towards wages and employment.

“People seem rightfully concerned whether or not they will be able to pay their bills in the coming months. Policymakers have started to throw everything they can to keep the financial sector alive, but it is increasingly clear that direct support to households and the wider economy is required to ensure stimulus is adequately filtered through to those in dire need.”

The data also showed there were signs of housing market conditions softening in March as UK households reported the slowest rate of growth in prices since last November.

IHS Markit indicated a rise in house prices was still expected over the next 12 months, although at a slower rate than it measured in February.

interactive investor personal finance campaigner, Myron Jobson, added: “This crisis has happened ever so quickly, and those in financial difficulties may be tempted to use credit cards or take out loans to tide them over. Even after two emergency rate cuts and historic low interest rates, some forms of debt, like credit cards, can be very expensive so it is important for people to explore all their options.

“The Chancellor has pledged payment holidays of up to three months for mortgage holders affected by the coronavirus. It is important to remember that payment holidays will not constitute free money – you’d need to pay it back.”

Share Story: