Britons stashed away more than ever before between April and June this year, official figures revealed, as the coronavirus lockdown kept the country at home and prevented people from spending.
The percentage of disposable income which households saved rose to an all-time high of 29.1 per cent, more than double the previous record of 14.4 per cent set 27 years ago.
Households have never saved more than a tenth of their disposable income since March 2015, while the highest the savings ratio had been this century was 12.2 per cent, in the first three months of 2010 in the aftermath of the 2008 financial crisis.
The percentage of disposable income saved by households rose to an all-time high of 29.1% between April and June during the coronavirus lockdown
The enormous spike in saving was largely down to the closing down of large swathes of the economy meaning a lack of spending and office workers saving money on commuting costs.
The Office for National Statistics said that over the same period household spending fell 23.6 per cent, which it said reflected ‘how lockdown restrictions have had particularly pronounced effects on social consumption involving spending that is more reliant on physical interaction with other people.’
It added: ‘The decline was driven by falls in spending on restaurants and hotels, transport, and recreation and culture as households have been unable to spend on these types of social consumption.
‘This also likely reflects the effects of the increase in remote working, which has led to a decline in work-related consumption, such as spending on travel.’
Britain’s national statistician previously estimated that £182 a week, or more than a fifth of household spending in March 2019, was spent by households on activities largely prevented by the pandemic, while it even removed a fifth of the items used to calculate price rises at the height of the national lockdown in April, due to consumers being unable to purchase them.
Andrew Hagger, founder of personal finance site Moneycomms, also said the fear of unemployment following the recession caused by the coronavirus had driven households to save more.
|Month||Amount owed on credit cards||Monthly change||Monthly percentage change||Annual percentage change|
|Source: Bank of England (seasonally adjusted data)|
He said: ‘That’s what the fear of mass unemployment does to people, not spending but putting cash aside in case they lose their jobs.
‘It’s also boosted by refunds from already paid for holidays and people saving on travel expenses by working from home.’
The data from the ONS supports figures previously published by the Bank of England, which revealed how Britain became a nation of ‘accidental savers’ during the coronavirus lockdown.
Households paid back billions of pounds more than they borrowed between March and June as the coronavirus lockdown massively curtailed consumer spending
Households saved £54.6billion in three months between April and June, compared to an average of £5.1billion a month before the coronavirus, and stashed away another £14.5billion into Treasury-backed National Savings & Investments over the same period.
Meanwhile, households also cleared £7billion from their credit cards and paid off another £4.8billion worth of other loans, according to the Bank of England.
But there are questions over whether the enormous rise in household saving will carry through following the easing of the lockdown and the reopening of non-essential shops, pubs and restaurants.
Britain’s biggest bank found non-essential spending rose year-on-year in August for the first time since February, as the Government’s Eat Out to Help Scheme drove people to spend more
Britain’s biggest bank Lloyds found non-essential spending by its customers rose by 4 per cent year-on-year last month, the largest annual increase since July 2019, on the back of the Chancellor’s Eat Out to Help Out scheme.
Bank of England figures found Britain began borrowing again on credit cards, loans and overdrafts in July and August while, more worryingly, recent survey data from the ONS suggests more households are concerned about their ability to save and pay unexpected bills.
Between mid-June and the end of July the percentage of those surveyed who said they would be unable to pay an unexpected £850 bill rose from 26 per cent to 33 per cent, while 36 per cent said they would be unable to save for the year ahead.
|Number of inflation-matching easy-access accounts||Number of inflation-matching accounts in total|
|Seven high street banks||1||11|
And even those able to save more money may not have taken full advantage of it by earning the most interest they can on their savings.
Industry data provided to This is Money by Paragon Bank from CACI, which includes Britain’s biggest banks as well as other major savings providers like Ford Money, Marcus Bank and Yorkshire Building Society, found that at the end of June £4 in every £10 saved, or £216billion in total, was earning interest of 0.1 per cent or less.
The half year results of Barclays, Lloyds Banking Group and Santander revealed how savers had poured in more than £50billion pounds of savings over the first six months of 2020, despite the fact these banks pay as little as £1 interest on every £10,000 saved.
And even though inflation fell to its lowest level since December 2015 last month, hitting 0.2 per cent, just 11 out of the 661 inflation-matching accounts available to savers were offered by Barclays, HSBC, Lloyds, Nationwide Building Society, NatWest, Santander or TSB.
Savings rates fell to historically low levels over the course of the lockdown, following the decision of the Bank of England to cut its base rate to a record low of 0.1 per cent in mid-March.
Between the start of March and the start of July the average rate paid on an easy-access savings account more than halved from 0.5 per cent to 0.23 per cent, while the average rate on a one-year fixed-rate bond slumped from 1.15 per cent to 0.66 per cent, according to the analyst Savings Champion.