Happy New Year – and some more effects of the pandemic

Happy New Year to all of our readers, after a momentous and in many cases tragic 2020.

New vaccines are a hopeful development, but in the short term we face tougher restrictions and nore uncertainty.

Many of the effects of the pandemic look set to be rolled out in the months ahead.

Many office workers have been working from home and saved the costs of commuting and eating out. Many have simply not been able to spend on leisure activities and nights out.

With job losses growing and likely to continue to grow, especially among traditionally low paid workers (for example in retail), income inequalities look set to widen further.

Figures from FICO for November show an increase in credit card use, as the Christmas spending round and Black Friday were underway. Repayments as a percentage of balance decreased and the average balance of accounts which missed consecutive payments increased. The proportion of people making only the minimum payment also increased.

The concern is that in some cases consumers may feel a false sense of security because of the furlough scheme (due to run until the end of April) and short term payment deferrals, or that consumers were determined to spend for Christmas this year come what may!

The fear is that the debts that many are getting into may not be manageable in the new year.

On the stock market three of the ten worst performing major shares during 2020 were banks – Lloyds, NatWest and Standard Chartered – despite the fact that some divisions (for example wealth management) have done well. Banks tend to prosper when the economy is doing well, less so during hard times when customers struggle to repay debts.

There is a temptation to think that store closures will make it easier for the stores that survive to prosper. However the survivors will still have to compete with online businesses and also hope that potential customers feel that they have good reason to continue to visit the High Street to shop.

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