Coronavirus: 1.1 million people 'plunged into poverty' in UK by 2021

Tom Belger
Finance and policy reporter
Jaywick in Essex, one of England's poorest areas, as new figures suggest UK poverty will rise significantly in 2020. (PA)

More than one million people will be “plunged into poverty” by the coronavirus crisis by the end of the year as cuts to jobs, pay and hours deepen, a think tank has warned.

New analysis suggests the number of people struggling below the breadline will be 7% higher by 2021 than if the pandemic had not hit the UK.

200,000 more children will be among the 1.1 million people left poor by COVID-19’s wide-ranging effects on UK households, according to the left-leaning Institute for Public Policy Research (IPPR).

Officials report an “unprecedented” surge in claims for Britain’s main welfare benefit since mid-March when the lockdown began, with 2.9 million claims. “Those newly forced to rely on universal Credit will experience a major hit to their living standards,” said the IPPR in a press release.

Meanwhile 8.7 million workers have been furloughed, with many taking a 20% pay cut and at increased risk of redundancy as state support is scaled back later this year.

READ MORE: Young people suffer steepest drop in working hours during lockdown

Household surveys suggest many others including self-employed workers have seen hours slashed or incomes dry up during the pandemic. The IPPR’s research is based on Bank of England estimates that unemployment could reach almost 10% in the final three months of the year.

It expects income to drop for some 800,000 households with children, pushing 300,000 children into poverty. But it expects a government boost to universal credit to lift another 100,000 children out of poverty.

The think tank warns many parents with jobs may struggle to maintain their previous work routines, when doing so is “difficult or impossible” with many schools taking only limited pupil numbers.

Clare McNeil, IPPR associate director, said: “This analysis shows that hundreds of thousands of families and their children who may have been ‘just about managing’ before COVID-19 now face being plunged into poverty. 

“The chancellor must include in this summer’s stimulus a package of measures to support families alongside funding for physical infrastructure and job creation.”

READ MORE: Firms warn of closures and job losses if furlough grants cut

She said investment in childcare options and reversing cuts to welfare benefits would help parents.

A department for work and pensions spokesperson told Yahoo Finance UK: “We’re committed to supporting the most vulnerable in society throughout the current emergency and beyond.

“We have injected £6.5bn ($8.2bn) into the welfare system, including increasing universal credit and working tax credit by up to £1,040 a year, to help those in most need. We’ve also rolled out income protection schemes, mortgage holidays and additional support for renters.

“This builds on action already taken to support low-paid families such as raising the living wage, uplifting benefits by inflation and increasing work incentives.”