During the COVID-19 pandemic, households of workers on furlough have saved what they would normally spend on travel and entertainment. Does this mean a UK-wide spending spree will happen once we fully unlock in July?
Dur to the high levels of household savings, are we going on a spending spree soon?
It is estimated that an average household has been able to save up to £7,000 since the start of the first lockdown. The question economists now have is whether they'll start to spend those savings.
"Are we about to splash the cash?"
It would certainly cause a consumer-led economic recovery, and every retailer would be hugely grateful after such a challenging time. The Treasury is estimating that in 2021, the UK's economic recovery could be 7.2% which is far better than many major economies around the world. They're hoping that we'll get out there and spend the estimated £195 billion that's now sitting in our savings accounts.
It is estimated that, on average, the 27.8 million households in the UK have been able to save up to £500 per month since the first lockdown, so the furlough scheme has certainly contributed to those savings levels.
However, totals would be offset by the self-employed who have received support via SEISS and directors of small businesses who applied for Bounceback Loans. And, of course, there were many individuals who lost all of their income through no fault of their own and had to claim Universal Credit.
This has caused a lot of households to deplete their savings, but that still averages out to £7,000 per household across the entire country. There's a lot of money just sitting there, waiting to be spent. So, the 195 billion pound question is this: what's going to happen when we unlock in July?
Many are hoping we'll all go on a massive spending spree.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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