Ethnic minorities at higher risk of debt due to economic crisis, analysis finds

People from black, Asian and other minority ethnic communities are particularly at risk of financial problems and rising debt caused by the Covid-19 economic crisis, according to a think tank.

The IPPR (Institute for Public Policy Research) said people from black, Asian and other minority ethnic communities were particularly likely to face financial difficulties before the crisis – 12% to 18% reported struggling, compared with 7% across the general population.

Among borrowers, those from black communities also had particularly high relative debt levels compared with their income, at an average equivalent to 18% of their annual gross income, compared with 12% across all groups, the research found.

Looking at people from all minority ethnic groups who were employed or self-employed at the start of the year, 13% were no longer working in June, compared with 5% of the group generally, the IPPR said.

People from minority ethnic communities are also particularly likely to be renters, and will not have had the benefit of mortgage payment holidays that home owners have had, it added.

Shreya Nanda, IPPR economist and an author of the report into the research, said: “Without further intervention, we are on course for a new debt crisis from which black, Asian and other minority ethnic people are particularly at risk.

“Many in these communities are likely to experience financial difficulty in the months ahead, and to be vulnerable to eviction as a result of rent arrears.

“Such economic insecurity risks compounding the already disproportionate health impacts borne by people with minority ethnic backgrounds during this crisis – effectively a ‘double whammy’.”

Anna Round, who is also working on the project and is a co-author, said: “It’s crucial to understand how vulnerable different groups are to the growing risk of debt as a result of the coronavirus crisis.

“We are now undertaking further research that will enable policymakers to gauge what kind of interventions would best protect these groups, as well as others most vulnerable to the economic effects of the crisis.

“Action will be needed to prevent minority ethnic communities in particular from falling into a damaging spiral of financial insecurity and problem debt.”

The IPPR analysed data from the Understanding Society survey of UK households for the research.