Ethnic minorities, people with disabilities, renters and young adults are at particular risk of problem debts this winter, a think tank is warning.

The IPPR (Institute for Public Policy Research) said that many of those who are most vulnerable to Covid-19 are also at risk of facing financial hardship due to the pandemic.

People living in the North East of England could also be at particular risk of harmful debt, the progressive think tank warned.

It said the economic shock could turn manageable debts into problem debts or force households to increase their borrowing unsustainably.

Unemployment, furlough or unexpected costs due to the pandemic have the potential to turn sustainable consumer debt into a major burden.

Shreya Nanda, IPPR economist, said: “The reality is that an increasing number of people simply do not receive enough income to cover the costs of daily life, even when it is lived very frugally. Now Covid-19 threatens to push even more people into problem debt through no fault of their own.”

During the crisis, people expect a one in seven chance of not being able to pay their usual bills on average, according to the IPPR’s analysis.

The IPPR found: – People from ethnic minorities are twice as likely to have lost their jobs or stopped working during the crisis than white people. People from Black, Asian and other minority ethnic communities were also more likely to have faced financial difficulties before the crisis and are more likely to expect difficulty paying bills during the crisis.

– Renters and mortgage holders are more likely to hold debt, more likely to be struggling financially and be behind on bills. On average, renters are significantly more likely to anticipate facing financial difficulty (26%) than home owners (7%) or mortgage holders (11%).

– Young people aged 16 to 29 are over twice as likely to have lost their jobs or stopped working than the average during the pandemic. Young people’s jobs are particularly concentrated in sectors impacted by Covid-19 restrictions.

– Many people on low incomes, including some people working in the food and hospitality sectors, were struggling before the crisis. They are more likely to anticipate financial difficulty during the pandemic or to have lost their jobs.

– Those with long-term health conditions or a disability are also more likely to live in households behind on bills and they have higher expectations of experiencing financial difficulty during the pandemic.

– There are also regional variations regarding risks of financial hardship.

Higher pre-pandemic debt levels, coupled with low average incomes and tough local restrictions mean people in the North East of England and East Midlands are at particular risk of problem debt, according to the IPPR.

It said that, for example, nearly a third (32%) of people in the North East had some kind of debt pre-pandemic compared to 27% across all regions.

People in London were more likely than those in other areas to report struggling financially and being behind on bills before the crisis (16% compared with 8 to 11% across other regions). This is potentially linked to higher housing costs there, the IPPR said.

Median average debt-to-income ratios among borrowers were found to be particularly high in Scotland and Northern Ireland, with Yorkshire and the North East close behind.

The IPPR said urgent action is needed to address the impact of the pandemic on household debt.

Support for debt charities, local authorities and communities should be increased, it said.

The IPPR also said jargon should be cut out of communications about debt and affordability.

It also called for more investment in technology which could help people with budgeting and improve affordability checks.

Access to low-cost credit options, such as loans offered by credit unions and other community finance initiatives, also needs to be improved, it said.

Anna Round, IPPR north senior research fellow, said: “We need support in the short-term to make sure that households and local economies don’t bear the brunt of problem debt as a result of Covid-19, and long-term action to prevent problem debt – including technological innovation and access to affordable credit.”