Consumers spend savings as lockdown eases

‘Euphoria’ of shops reopening could trigger a wave of spending.

Consumers are set to start spending cash saved during lockdown as many shops and pubs reopen.

Non-essential shops such as hairdressers, as well as pub gardens, were allowed to reopen from this morning (12 April).

It marks the latest removal of lockdown restrictions and allows many shops, pubs and restaurants to welcome back customers.

Many households built up large amounts of savings during the pandemic as spending on eating out, luxuries and holidays was restricted.

Bank of England estimates show that in the period March to November 2020 alone households accumulated £125 billion more in savings than would have been expected, with more likely since then.

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The Office for Budget Responsibility predicted last month that household spending could be set to rise due to the “euphoria” of the economy reopening.

It said: “First, there may be a degree of euphoria once the pandemic is past, leading households to wish to treat themselves.

“Second, spending on durables is a form of saving as the associated flow of services is spread over time.

“Third, the additional household savings have been held primarily in liquid form, allowing them to be run down more easily.”

The Centre for Economic and Business Research (CEBR) predicts England’s outdoor drinkers and diners will provide the hospitality sector with a £314 million boost this week alone.

In pre-pandemic times, households across England spent a cumulative £663 million per week on dining and drinking out, the CEBR said.

It highlights figures that showed in the first week after lockdown one, diner numbers rebounded to 33% of pre-pandemic levels. In the first week after lockdown two the rebound was stronger, with levels at 56% of the pre-pandemic norm.

The British Retail Consortium (BRC) is also hopeful that there will be a boost.

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Helen Dickinson, chief-executive of the BRC, says: “Savings have been building up over lockdown, and the economic recovery relies on retailers being able to unlock the pent-up demand in the economy.

Financial advisers and experts also back raising a glass in a pub garden or restaurant outdoors, but are still urging caution.

Andrew Neligan, wealth manager for Neligan Financial, predicts an economic boost to the economy due to a wall of unspent money as well as people returning to workplaces, so spending money on clothes and Starbucks coffees.

He says: “The wise might see the unspent money as a great opportunity to save for the future and so invest it sensibly, but equally, having a sense of national duty to spend money to get the economy moving again is a justifiable excuse.

“As with everything moderation and balance are key, anyone who spends any surplus is likely to look back on an opportunity missed to bring forward their point of financial independence.”