02What was the financial situation in the UK’s largest cities and towns before the pandemic?
People living in cities and large towns in the North and Midlands entered the pandemic with a smaller financial cushion
When the pandemic started, cities and large towns up and down the country were on very different financial footings. As illustrated in previous research by Centre for Cities, households in northern and Welsh cities tended to have a higher debt-to-income ratio (see Figure 1).6 Places like Swansea, Sunderland and Wigan – traditionally weaker economies – had a debt-to-income ratio almost three times higher than that of places with stronger economies, such as Oxford, Cambridge and Exeter.
Figure 1: Households in northern and Welsh cities tended to have a higher debt-to-income ratio
Households in places with a higher debt-to-income ratio were more likely to experience ‘problem debt’ that they were struggling to repay. This can be seen in Figure 2, which shows places such as Hull, Liverpool and Blackpool had the highest number of CCJs per 100,000 population. On top of this, CCJs have a negative effect on credit scores, so impact the quality of future debt available to the people who receive them. This means an area with high CCJ incidence is likely to see more sub-prime lending.
As such, households in cities and large towns in the North and Midlands entered the pandemic in a much weaker financial position, suggesting that even a small shock to their income could have a large negative effect on their financial situation.