Local and regional lockdowns are being imposed across the country under the government’s tiered restrictions on travel and business openings © Ian Forsyth/Getty

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The UK financial regulator is urging borrowers affected by coronavirus lockdowns to seek support from their banks, as its figures show 12m Britons are likely to struggle with bills or loan repayments.

In its strongest call to action yet, the Financial Conduct Authority has told consumers in difficulty to ask their lenders for more support and seek free debt advice from government-backed bodies and charities. It has also stressed that it had told banks to offer more options to borrowers after October 31, when three-month repayment holidays will no longer be automatically available.

Thursday’s message from the FCA follows a nationwide study that found 31 per cent of adults had experienced a drop in household income during the Covid-19 pandemic, with under 35s and black, Asian and minority ethnic (Bame) people the most likely to be affected.

As a result, an additional 2m Britons have been classified as having “low financial resilience” — meaning they may struggle to cover bills or debts — taking the total to 12m.

Regulators now appear concerned that further local lockdowns, under the government’s tiered restrictions on travel and business openings, could hit household finances even harder.

Alongside its research, which was conducted in July, the FCA said: “The increasing coronavirus-related restrictions placed on a number of areas of the UK in recent weeks may lead to increased financial difficulty for some people.”

According to an analysis by Citizens Advice, the consumer charity, some of the financial support available to individuals under local lockdowns is less than that offered during the national lockdown in the spring. Gillian Guy, chief executive of Citizens Advice, said: “While protections for people struggling with household bills are strong in some areas, they are inadequate in others. This is particularly the case for council tax and rent, which are many people's largest monthly outgoings . . . there’s a real possibility that new lockdown restrictions will force many people into debt this winter.”

Citizens Advice is calling on the government to extend the £20 a week uplift to universal credit payments beyond next April, to help the 6m people already behind on household bills.

In the FCA research, almost one-third of UK adults reported a fall in their earnings, with average household income down by a quarter. But among Bame adults, the proportion suffering a loss in earnings rose to nearer four in 10. Those aged between 25-34 were the most likely to have had “a change in employment” as a result of the pandemic. One-fifth of this age group also said they were likely to need debt advice, compared with only 2 per cent of 55-64 year olds.

Under the FCA’s post-October support measures, all borrowers can ask their lenders about long-term and short-term debt relief options, which can include suspending or waiving interest, cutting repayments, or agreeing a new repayment plan. Tailored support is also available to overdraft customers.

However, consumer group Which? warned that these options would not be enough to make up for the withdrawal of government wage support schemes and repayment holidays next month.

“While the FCA's action will help some who will struggle financially when support measures like furlough come to an end, it does not go far enough . . . particularly as swaths of the country face further restrictions and uncertainty,” said Gareth Shaw, head of money at Which?

“The regulator has wound down vital protections like payment deferrals too soon and banks could now be overwhelmed by a huge number of customers that will be applying for urgent financial assistance in the next few months.”

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