Financial Inclusion Monitor 2020

The University of Birmingham has been monitoring financial inclusion in Britain since 2013. This website provides key findings, selected charts and a link to the full downloadable report. The report authors are Stephen McKay and Karen Rowlingson.

Download the Financial Inclusion: Annual Monitoring Report 2020 now [.docx]

CHASM and University of Birmingham logo

Key findings

  • COVID-19 has had, and will continue to have, a devastating impact on household finances in the UK and globally. But our report shows that household finances, and the UK’s economy more generally, was already faltering in many ways, prior to the pandemic, possibly as a result of Brexit-related uncertainties during 2019.
  • In the second quarter of 2019, economic growth was negative and in the fourth quarter of 2019 it was zero. Furthermore, unemployment, under-employment and zero hours contracts had all increased in 2019 while wages had started to fall in real terms towards the end of that year and into early 2020.
  • Subjective financial wellbeing was also in decline prior to COVID-19 with an increase in the proportion of people saying they were ‘just about getting by’ or ‘finding things difficult’ in 2017/18 – the first time this figure had increased since 2009/10.
  • So, there were clear signs of actual and potential strains on family budgets during 2019, prior to COVID-19. The impact of the pandemic on top of this situation looks set to be monumental. From just March to May 2020, between one quarter and one third of jobs were furloughed and from March to April that year there were 2 million more claims for Universal Credit than there had been in the same period in 2019. By the end of May 2020, 28 per cent of the population said that COVID-19 had had a direct negative effect on their income.
  • The Job Retention (furlough) Scheme and the boost to Universal Credit have been incredibly important interventions to support people’s incomes. Those on ‘legacy’ benefits, however, are not seeing the same level of income protection, leading to a two-tier benefit system. And despite all this support, the Trussell Trust saw a doubling of emergency food parcels going to children in April 2020 compared with April 2019 and other charities report increasing levels of debt and fear of eviction among their clients.
  • There is slightly more positive news in relation to financial inclusion with the number of people ‘unbanked’ reaching an all-time low in 2018/19. But there is growing concern about access to cash as bank branch closures escalate and free cash machines continue to disappear from local high streets.
  • There is also some good news with increasing levels of occupational pension membership but, here again, there are concerns that contribution levels are too low to provide a sufficient level of income on retirement.
  • These are extremely difficult times for the country and many within it. A significant minority of the population, however, are unaffected, financially, by COVID-19 or, indeed, are seeing their savings increase as their income remains the same and their spending has reduced. Thus, inequality is likely to rise further.
  • After 2015, GDP started trending downwards and, indeed, was recorded as negative in the second quarter of 2019 and zero in the fourth quarter, even before the COVID-19 crisis. In the first two quarters of 2020, GDP was recorded as dropping by one-fifth, an unprecedented reduction.
  • Inflation has been trending down in the last two years from a recent peak of 3.1 per cent in November 2017 to 0.5 per cent (CPIH) in August 2020. The most recent falls in prices were mainly due to the lower cost of motor fuels (due to a price war between Russia and Saudi Arabia) and to falls in the price of recreational and cultural goods in the wake of the COVID-19 crisis.
  • In an attempt to support borrowing and demand, the Bank of England Base Interest Rate was reduced in March 2020 to the lowest it has ever been in the Bank of England’s 325-year history: 0.1 per cent.

Selected findings

The Economy

As a result of the COVID-19 pandemic, the British economy has suffered an unprecedented shock.  To some extent, living standards have been protected by equally unprecedented government intervention.  But the future for both the economy as a whole and individual living standards looks very uncertain.

1:1 A key indicator of the state of an economy is GDP (Gross Domestic Product) which is the amount an economy produces each year. Figure 1.1 shows that over the course of 2008-9, GDP fell as a result of the Global Financial Crisis by 7 percentage points in total. From then until 2012, there was a slow recovery. However, since 2015, GDP has been trending downwards. First signs of the impact of the crisis can be seen in the figure for the first quarter of 2020 (January to March) when GDP fell by 2.5 per cent. This was, however, dwarfed by the 19.8 per cent drop in the following quarter (April to June), a reduction unprecedented in modern times.

Source: ONS. Last updated 30 September 2020.

The Labour Market

Most recent data shows that unemployment on the eve of the COVID-19 pandemic was far lower than at the height of the Global Financial Crisis of 2008/9 but there are signs that unemployment may have been starting to increase before the COVID-19 crisis, possibly in response to Brexit-related developments. 

2.2  Underemployment dropped between 2014 and 2018 from 3.1 million to 2.4 million workers ‘underemployed’ (see figure 2.2). But this was still more than the 1.9 million underemployed before the 2008/9 recession and the figures were trending slightly upwards again to 2.5 million by December 2019. Nevertheless, more workers considered themselves ‘overemployed’ (in other words they wanted to work fewer hours and would be willing to take a commensurate cut in pay) – nearly 3.5 million - at the end of 2019.

Source: Labour Force Survey

Source: Government Statistics

2.7  Data from September 2020 showed that the number of people who were estimated to be temporarily away from work (including furloughed workers) had fallen, but it was still more than 5 million in July 2020, with over 2.5 million of these being away for three months or more. And the unemployment rate as measured by the ‘Claimant Count’ reached 2.7 million in August 2020, an increase of 120.8% since March 2020. 


According to latest official figures from before the COVID-19 pandemic, around 14 million people were living in poverty in the UK (more than one in five of the population).  This included 8 million working-age adults, 4 million children and 2 million pensioners.

3.5  Levels of poverty have remained relatively stable over the past few years as measured in relation to average (median) incomes. But it is clear that some groups are suffering particularly severe levels of poverty and thus turning to emergency sources of help, such as foodbanks. Figures from the Trussell Trust, for example, show a dramatic increase in the number of 3-days emergency food parcels given out over the past few years with an increase from just over 61,000 in 2010/11 to nearly 1.9 million from 1st April 2019 to end of March 2020, that is, largely before the COVID-19 lockdown (see figure 3.5). The primary reason for use of food banks was, according to the Trussell Trust: low income; benefit delays; and benefit changes (including sanctions).

Source: Trussell Trust


Savings are important in relation to financial inclusion because they can help people meet one-off expenses (both anticipated and unanticipated expenses). They can also help people to manage a drop in income and avoid taking out high-cost credit and/or experiencing problem debt.

Source: ONS. Last updated 30 September 2020

6.1  From 1999 to 2019, the household saving ratio has hovered at around 8%, reaching a high of nearly 13% in 2010 before falling to about 5% in 2017.  The COVID-19 pandemic has caused a huge spike in the saving ratio to 28% in the second quarter of 2020 (that is, April to June) as opportunities to spend were reduced during lockdown which, in effect, 'forced' some people to save.