Record spending spree to reignite economy post-pandemic, says BoE

UK households have built up record levels of savings during the pandemic, saving up to five times as much as in any other nine-month period on record, with the economy effectively in hibernation. 

Because of this, the Bank of England said it expected £6.25bn of pent-up savings to be spent but the economic recovery would be even quicker if people spent more. 

Its latest forecasts predict the ground lost by the economy since the end of 2019 will be made up within 12 months, despite the last 10 months of restrictions and lockdowns. 

The bank’s governor Andrew Bailey put the potentially rapid recovery down to the vaccine rollout, which continues at pace across the UK. 

Bailey added that it was likely savings would continue to grow in the first half of 2021 with lockdowns remaining. 

“That [£125bn] figure is likely to rise substantially further over the first half of 2021. One of the things we deliberated a lot on this time is the pace in which they are used in the recovery phase. There is a risk that it could be larger. So it’s an upside risk,” he said.

The bank found that most people expected life “to return to normal” within a year because the arrival of vaccines had “boosted confidence that the pandemic will be brought under control”, which would “support a material recovery in household spending”.

It predicted the vaccine programme would allow for most restrictions to be lifted by April before further rollout over the summer, which would allow for their full removal by September. 

Both predictions of a strong economic recovery and pent-up spending demand from the public will come as music to the ears of struggling retailers. 

Data from the BRC and KPMG for 2020 found overall retail spend fell 0.3%, while the various lockdowns and tiered restrictions saw tens of thousands of stores shuttered and hundreds of thousands of jobs lost.