Brits to save £23bn as lockdown sees dramatic fall in spending
For many households, the coronavirus crisis will mean they need to fall back on their savings.
But estimates from the Centre for Economics and Business Research (CEBR) show that on average, households will still be able to put more money aside as ‘spending opportunities have disappeared during the lockdown’.
Its analysis reveals that the average share of household disposable income that is saved will rise to over 20% during lockdown.
CEBR suggested average monthly household spending is £795 lower (a 30% fall) than before the lockdown measures announced by the government to stop the spread of coronavirus.
This allows the average household to save an additional £280 a month, even after accounting for an average monthly income drop of £515 in Q2.
The think tank said this is the equivalent to a 130% increase in monthly savings which scaled up to all UK households, equates to £23bn in excess savings over the quarter.
‘Leisure spending is all but wiped out’
The analysis comes off the back of March retail sales data published today which revealed volumes fell by 5.1%, which is the largest fall since the Office for National Statistics series began.
Analysis of debit card spending in the first two weeks of the lockdown (23 March) showed that sales at non-grocery suppliers fell by around 45%, compared to a year ago while spending at grocery suppliers rose by 16%.
Spending on transport has dropped dramatically, with government data showing that rail and tube use are down 95% compared to pre-lockdown levels. Further, spending on holidays, restaurants, hotels and other leisure activities outside the home has been all but wiped out.
CEBR said many households currently consider it important to build up a cushion of cash to fall on, should they lose their incomes as a result of the current economic turmoil. Therefore, the dramatic reduction in spending that has come about as people stay in their homes will be welcomed by many amid the heightened uncertainty.
Yet, when the lockdown ends, the extent to which people are willing to spend their built-up cash supplies will be critical to getting the economy going again, it added.
Josie Dent, senior economist at CEBR, said: “As shown in today’s retail sales figures, many people are cutting back on their spending amid the coronavirus crisis, due to shops being closed as well as economic uncertainty prompting many to save. CEBR has estimated that during the lockdown, total household spending will be 30% lower than what it was before the crisis.
“Therefore, despite falling incomes due to wage cuts and rising unemployment, the amount households save each month is expected to be 130% higher under lockdown than before the crisis.”