UK households ramped up savings in early 2021 lockdown

British households increased their savings sharply in early 2021 as a return to lockdowns prevented them from visiting bars, restaurants and many shops, potentially boosting their spending power for the economic recovery now under way.

The country’s savings rate, which measures the income households save as a proportion of disposable income, rose to 19.9 per cent from 16.1 per cent in the fourth quarter of 2020, the Office for National Statistics said on Wednesday (30 June).

That was the second-highest savings rate on record after a leap to 25.9 per cent in April-June last year during the first round of coronavirus lockdowns.

The data also showed Britain’s economy shrank a bit more than previously thought in the first quarter as gross domestic product contracted by 1.6 per cent. The ONS had previously estimated GDP shrank by 1.5 per cent.

Household spending was weaker than first estimated.

However, the hit to GDP in early 2021 was just a fraction of the roughly 20 per cent slump in the second quarter of 2020 when Britain was in its first lockdown. Many businesses have adapted to the rules by, for example, ramping up their online operations.

Britain has suffered one of the world’s biggest coronavirus death tolls and its GDP shrank by almost 10 per cent in 2020, a more severe hit than in almost all other advanced economies.