Furloughed staff more likely to have defaulted on bills

Furloughed staff are significantly more likely to default on debts, according to new research from Which?

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Furloughed workers or those put on enforced leave or reduced hours are three times more likely than other employees to have defaulted on a payment last month, according to analysis by Which? as research shows more than half of furloughed workers have returned to work.

The Which? poll of over 2,000 adults shows that 13% of those furloughed or put on enforced leave or reduced hours, defaulted on at least one payment, compared with 4% of those still working as normal. Seven per cent of this group had defaulted on a bill, and six per cent had defaulted on a loan or credit card payment. Of those renting or holding a mortgage, five per cent had defaulted on their housing payment. Some respondents will have defaulted on more than one payment type.

The default rates for bills, as well as loans and credit cards, are more than double that of those who are still working as normal. The research also shows the majority (60%) of those furloughed, put on enforced leave or given reduced hours reported having made one or more changes to their spending patterns in the last month that indicate financial pressure. This compares to 42 per cent among those working as usual.

Richard Piggin of Which? said: “Despite extensive action being taken by the Government and the banking industry, it’s very worrying that people currently on the furlough scheme have reported experiencing much higher levels of financial difficulty than those who are working as normal.

“With just a couple of months until the scheme comes to an end, there is real concern that this gap could widen even further.”

The analysis comes as research by the Resolution Foundation think-tank shows that more than half of furloughed employees have already returned to work. Its analysis shows that the peak number of furloughed workers was almost 8m in late April. Since then, a large number of staff have returned to work either fully of part time, leaving fewer than 4.5m employees currently furloughed. From this month, employers have to start contributing to the furlough scheme.

It believes furloughing should be phased out “more slowly” for certain sectors, warning that as many as one million people in hospitality and leisure roles may be facing redundancy if not. The Federation of Small Businesses (FSB) says the Government “cannot afford to pull up the business support drawbridge any time soon” and has called for a cut in employment taxes that could include a national insurance contribution holiday.

Labour and the TUC have also called for the scheme to be extended and to be more flexible, in line with Covid-related developments while hundreds more job losses have been announced by companies ranging from Senior and Pizza Express to travel firm Hays.

Meanwhile, as the Government’s ‘work from home’ guidance comes to an end, with Boris Johnson suggesting people should head back to the office if possible, British Chambers of Commerce research suggests 62% of employers expect their staff to remain working remotely for the foreseeable future, saying some or all workers will be working from home for the next 12 months. Music companies Sony, Universal and Warner have asked their staff to work from home as much as possible for the rest of 2020 due to concerns over Covid-19.

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