Britons are planning to use a hefty chunk of the savings built up over the past year to go on a £50bn spending spree once restrictions are lifted, a report has said.
Research by the Isa provider Scottish Friendly and the consultancy, the Centre for Economics and Business Research (CEBR), found that households intend to take more holidays at home and abroad, travel, and go out to eat in cafes and restaurants.
The report said a quarter of the £192bn of lockdown savings accumulated since the pandemic curbed activity in the UK in March 2020 would be spent.
Last month, the Bank of England said it expected a more cautious approach by consumers, estimating that only 5% of the £125bn of excess savings generated between March and November last year would be spent.
Scottish Friendly and the CEBR said the report’s estimate that 26% of the savings would be spent was the result of studying 50 years of savings data and interviewing 4,000 people. They warned that strong demand as the economy reopened could cause a headache for the Bank by pushing inflation above the government’s 2% target.
Restrictions meant many households (46%) had accumulated higher savings in the past year, and these would now be run down to more normal levels.
More than a third (34%) of those who planned to spend more money this year said their cash would go towards travel and accommodation for overseas holidays, while 29% of those with extra savings said they intended to spend more on domestic holidays in 2021.
Spending on eating out last year was boosted by the government’s August eat-out-to-help-out scheme, but the report said irrespective of whether the incentive was reintroduced this year, 28% of people plan to up their spending in restaurants and cafes.
Kevin Brown, savings specialist at Scottish Friendly said: “The extra cash that many Brits have been fortunate enough to save over the past 12 months has been sat idle in bank accounts while people wait for restrictions to be lifted.
“A large proportion of Brits clearly intend to enjoy the opportunity to finally spend some of that cash over the comings months on holidays, meals out and in the shops.
“This will provide a welcome boost for many businesses, but it could lead to a sharp spike in prices during the remainder of 2021, which risks hurting many savers.
“If interest rates are kept low, there is a real threat that inflation could rise rapidly above the Bank of England’s 2% target and be difficult to control. If this is allowed to happen, then it will be UK households who bear the brunt of its force.”