Higher-earning Brits will help boost UK GDP this year by spending £16bn of the nation’s £160bn pot of excess savings, built up over the pandemic, once lockdown eases.
Economists at Deutsche Bank have revised upwards their estimates of the total pool of excess savings across bank accounts in the UK to a whopping £160bn.
They also predict a higher share of it will be spent as Covid-19 restrictions end,
While the Bank of England conservatively predicts around five per cent of the squirelled-away savings will be splashed out on extra nights out, meals, holidays, cars and more, Deutsche Bank wonks think it could be 10 per cent or even more.
“Would I be shocked by a £20bn figure of extra spending? No,” said one of the bank’s economists Sanjay Raja.
Even a more conservative splurge by Brits spending between five and 10 per cent of their excess savings would equate to “roughly a 0.5 per cent to 1.0 per cent of GDP boost to the near-term outlook”.
The bank economist said that although the share of excess savings that will be spent seems underwhelming, at 10 per cent, it is still over-and-above the planned spending these household usually enjoy.
And that would still be a boost for long-closed restaurants, travel agents and car sales showrooms.
“So, think of a couple who likes to go out to restaurants, they’re now likely to dine out twice a week instead of once”.
However, Raja said figures had shown a two-tier system,with low income households bearing the brunt of the worst of the pandemic.
The bottom half of income earners are actually more likely to be going into debt and hardly saving anything.
“These households, some may be on furlough and their costs are similar to before but their income is lower, are still reliant on credit, welfare, debt or family”.
Bank of England chief economist Andy Haldane said last month that large household Covid savings could see the UK economy benefit from an explosion in consumer spending post-lockdown to help charge a rapid economic recovery.
The past year’s declining costs and £400bn of government spending on Covid support has led to a large amount of savings for some Britons, with more than £18bn estimated to have been saved by households in January alone.
The Office for Budget Responsibility has estimated only five per cent of the pool of excess savings will trickle down into the economy.