Global instability fuelling financial inequality

by Flora Vieites
Business & Finance

How will 2020 be remembered? There will be no prizes for guessing the overarching theme. However, while we are all experiencing the COVID-19 pandemic at the same time, our experiences of it can be vastly different. 2020 saw us habitually tallying deaths on a daily basis. But one in particular prompted a turning point – that of a 47-year-old man in Minneapolis, George Floyd. While deaths such as Floyd’s may have seen localised disturbances in the US, this year several hundred thousand people around the world have marched and protested to show solidarity or to highlight where inequality and injustice continue to exist.

With people in the UK confined to their homes during lockdown – and already glued to the news media for regular coronavirus updates – the aftershock of Floyd’s killing reverberated through society and underscored issues that have been waiting, impatiently, to be discussed. In the aftermath, with demonstrations in British cities, concern about race relations hit the highest level Ipsos MORI has ever measured in its monthly Issues Index.

COVID-19 has intensified some of the disparities in our society. While the epicentre of recent events may be in the US, make no mistake, Britain has fissures which will become clearer still as we deal with the financial aftermath of the pandemic, coupled with a messy Brexit.

The level of inequality in our society is something that we should all be concerned about. Michael Johnson, the four-time Olympic gold-medallist and BBC pundit, described the atmosphere well: “This is not only black people, this is everyone who understands and appreciates fairness; they’re fed up. They’re demanding change … I’m hopeful that change truly does come, but that’s going to take time.”

COVID-19 has intensified some of the disparities in our society

BAME lady worried about bills

Inequality in our society is not solely confined to those with lower incomes

Ipsos’ Financial Research Survey shows people from ethnic minority backgrounds are more likely to fall under the Financial Conduct Authority’s definition of being ‘potentially vulnerable’ and this is mainly driven by having lower levels of ‘financial resilience’ (68% versus an average of 61%) – the definition of which includes finding finances a heavy burden, regularly missing payments or having to use an overdraft regularly to make ends meet.

While the financial landscape will be tricky for everyone as we face the recession, ethnic minorities will be particularly hard hit. People from BAME (Black, Asian and Minority Ethnic) backgrounds are statistically more likely to only pay the minimum of their credit card debt (26% versus 19%), while fewer hold savings accounts (52% versus 61%). Plus, the outlook is bleak for older age as just 46% are contributing to a pension. 

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of adults in Britain are currently or potentially vulnerable as defined by the Financial Conduct Authority

That said, inequality in our society is not solely confined to those with lower incomes. For even among those earning an above-average salary of £50k per annum, women are likely to have half the amount in savings compared to a man earning the same. Women are more likely to personally pick up additional household costs (e.g. top-up basket shopping), and additional spend on childcare incidentals such as pocket money. This equates to less money to invest and a less secure future in retirement.

Everyone now wants to ‘build back better’ – both governments and individuals. Lockdowns are a major psychological moment, with many normal distractions gone, forcing us to take stock of how we live – and how we spend. Innumerable reports have highlighted the inequalities that COVID-19 has worsened. And more than ever Britons want to do business with organisations that reflect their values – up from 56% to 72% in the last 12 months – so for savvy and committed financial services organisations, 2020 should also be seen as the year that provided an opportunity for meaningful change.

Flora Vieites

Flora Vieites

Research Director