Skip to main content

Introduction

The COVID-19 pandemic, and the national effort to contain it, have led to significant economic disruption, affecting the income of millions of people. To protect their finances, the UK Government introduced several interventions, including increasing the value of a number of working-age benefits.

A key component of this increase was the ‘uplift’ to Universal Credit (UC) and Tax Credits, with most existing and all new working-age benefit claimants seeing a weekly £20 increase in their benefit payments, which is scheduled to be fully withdrawn on 6 October.

Our previous research[i] has shown that despite these increases in working-age benefits, a significant minority of Universal Credit claimants have found it difficult to manage financially during the pandemic, including struggling with their regular household bills and housing payments. 

The state, of course, is not the only source of financial support for those in financial hardship. Another major provider of support is family and friends. This new analysis examines use of those informal sources of financial support to which Universal Credit claimants turn to.

Methodology

Bright Blue has used survey data from the Understanding Society COVID-19 Study[ii] to perform original analysis examining changes in the financial situation of UC claimants relative to the rest of the population during the first year of the pandemic.

The Understanding Society COVID-19 Study conducts surveys at specific intervals, with questions varying between different survey waves. The months during the pandemic used in the analysis (May 2020, July 2020, November 2020 and March 2021) were chosen on the basis of availability of data on answers to questions of interest.

All survey data has been weighted to be representative of the adult population of the United Kingdom. 

We focus on two population groups: those who do not claim Universal Credit (‘non-UC respondents’, or the ‘rest of the population’), and those who are claiming Universal Credit or are applying for it in the month of the survey (‘UC respondents’). Unweighted sample sizes for each group and each time period are shown in Table 1 below, alongside the total number of UC claimants in the United Kingdom in that month.

Table 1. Unweighted sample sizes of each group of interest and total number of UC claimants in the UK in that month

Time Non-UC UC Total number of UC claimants in the UK
May 2020 14262 549 5,260,000
July 2020 12635 537 5,512,000
November 2020 11328 494 5,789,000
March 2021 11806 603 5,972,000

Informal financial support

We begin by examining the proportion of UC claimants and the rest of the population who received informal financial help during the first year of the pandemic, as shown in Chart 1 below. 

We find a notable minority of UC respondents were receiving financial help from their family and/or friends throughout the first year of the pandemic. While the number of non-UC respondents reporting receiving help from family and/or friends remained steady between 4% and 5% during the first year of the COVID-19 pandemic, UC claimants were much more likely to receive such help throughout the first year of the pandemic, with 23% of claimants receiving such help in May 2020, rising to 25% in July 2020, before falling slightly to 19% in November 2020 and 17% in March 2021. This means that near the start of the pandemic, a quarter of all UC claimants were receiving financial help from family and friends, which would represent 1,378,000 claimants. By March 2021, this falls to an expected 1,015,000 UC claimants.
Next, we examined the specific person that provided informal financial help. The results for near the start and after one year of the pandemic are illustrated in Table 2 below.

Next, we examined the specific person that provided informal financial help. The results for near the start and after one year of the pandemic are illustrated in Table 2 below.

Table 2. Specific source of support mentioned by UC respondents who reported receiving financial help from family and/or friends

Source May 2020 March 2021
Parents 57% 72%
Adult children 33% 13%
Friends 26% 14%
Siblings 18% 10%
Neighbours 8% 4%

 

The most common source of financial help for UC respondents, as seen in Table 2 above, are parents, with a clear majority of 57% of UC respondents who received informal financial help mentioning parents in May 2020 and 72% in March 2021. This is followed by adult children, with about a third (33%) mentioning them as the source of informal financial help at the start of the pandemic in May 2020, falling to 13% in March 2021. After a year of the pandemic, parental support became an even more common form of support, with nearly three quarters of those receiving informal financial help relying on their parents.

We then examined the proportion of respondents giving financial help to family and/or friends, as shown in Chart 2 below. 

Notably, UC respondents were almost as likely as non-UC respondents to give financial help to family and/or friends during the pandemic as the rest of the population, despite having lower income. The number of both non-UC and UC respondents who gave financial help to family and/or friends during the first year of the COVID-19 pandemic remained relatively steady between May 2020 and March 2021. Between 13% and 16% of non-UC respondents reported providing such help during the first year of the pandemic. Similarly, between 11% and 14% of UC respondents reported giving financial help to family and/or friends during the first year of the pandemic. This would mean that in March 2021, we would expect around 780,000 UC claimants across the whole UK to be providing at least some financial help to family and/or friends.

We also looked at the types of recipients mentioned by UC respondents who reported giving financial help. The results for near the start and after one year of the pandemic and displayed in Table 3 below.

Table 3. Types of recipients mentioned by UC respondents who reported giving informal financial help to family and/or friends

Recipient May 2020 March 2021
Parents 40% 32%
Adult children 21% 36%
Friends 32% 19%
Siblings 8% 18%
Neighbours 22% 15%

 

Interestingly, at first, parents are more likely to be recipients of financial help from UC claimants among those giving such support to family and/or friends, with 40% of those giving informal help reporting this in May 2020 and only 21% reporting adult children. After a year of the pandemic, however, this reverses and adult children are slightly more likely to be recipients of UC claimants giving informal financial help, with 36% of claimants who give reporting adult children as recipients and 32% reporting their parents in March 2021. 

Finally, we also explained the proportion of UC and non UC respondents who reported both giving to and receiving from family and/or friends. This shows the extent of a wider informal network providing financial help to one another during the pandemic, as shown in Chart 3 below.

It should be noted that a small but notable proportion of individuals have both received from and given to family and/or friends, with this more likely among UC respondents. While between 1% and 2% of non-UC respondents reported both receiving from and giving to family and/or friends in the first year of the pandemic, this rises to between 4% and 6% for UC respondents. Considering 6% of UC respondents reported both receiving from and giving to family and/or friends after the first year of the pandemic, this would mean that in March 2021, we would expect around 240,000 UC claimants across the UK to be both receiving from and giving to family and/or friends.

Conclusion

Our analysis shows that significant minorities of UC claimants have received informal financial support during the first year of the pandemic, despite the strengthening of the safety net that has happened in March 2020. 

Though the proportion of UC claimants receiving financial help from those close to them has declined slightly during the first year of the pandemic, it has remained relatively high, with an expected more than a million UC claimants receiving it in March 2021. Hence, while the majority of UC claimants are managing their finances without informal sources of help, and some are even providing financial help to others close to them despite being on low income themselves, there are still over a million UC claimants who are relying on informal sources of support. Despite the financial pressures they are facing, after a year of the pandemic, UC claimants were as likely as the rest of the population to be giving informal financial help to those close to them.

The full removal of the uplift, scheduled for 6 October, will lead to an average income loss of 5% for households receiving Universal Credit. This sudden withdrawal is very likely to lead to an increase in the number of UC claimants seeking informal sources of financial support. 

References

[i] Anvar Sarygulov, “Benefit to all? Financial experience of Universal Credit claimants during the pandemic”, Bright Blue, https://www.brightblue.org.uk/benefit-to-all/ (2021).

[ii] University of Essex, Institute for Social and Economic Research. Understanding Society: COVID-19 Study, (2021). [data collection]. 4th Edition. UK Data Service. SN: 8644, 10.5255/UKDA‐SN‐8644‐4.

 

[Image: Tierra Mallorca]