According to recent reports conducted by the Office of National Statistics (ONS), the highest percentage of disposable income saved by households between April-June 2020 reached 29.1 per cent.
Since 2015, the reports had found that prior to this period, households had been unable to save more than a tenth of their disposable income. This saving aligns with a general fall in household spending of 23.6 per cent.
The UK has been intermittently locked down since March 2020, with sectors like tourism and hospitality remaining at least partially closed off for the majority of this time period. For many, this time has caused great financial uncertainty. With furlough schemes and redundancies in full swing, and certain industries totally unable to work, many households have seen a drastic fall in income.
However, for those who now work remotely, with at least one third of the UK’s population making up this group, the lockdowns have proved to be great opportunities to save income and significantly adjust spending outgoings. In fact, lockdown reported some of the highest rates in credit cards being paid back in history, including revolving credit facilities.
A fall in household spending can be drawn to a number of reasons, including a lack of commuting costs, hospitality spending on eating out, and holidays and entertainment such as the cinema and concerts. Further falls include in-person shopping and gyms, which have both now been completely closed in most areas of the UK for over a month.
The ONS has thus duped the households of the UK as a nation ‘accidental savers’ since the first lockdown was introduced. With bars, restaurants, hotels, and borders to other countries even closed off, there were virtually no opportunities for individuals to spend money on recreational or cultural activities.
The concerns surrounding spending money are not just practical, in terms of spending money on a meal out, but are also psychological. Many service industries have seen their positions in jeopardy. If individuals believe that they are at risk of losing their income, they will save more.
Outlook is central to the premise of saving, and when this appears to be compromised, this is when individuals are likely to try to place themselves in a position whereby they are able to save more.
However, it is no surprise that certain areas of household spending have in fact seen a rise since March 2020. This includes accessible services and products like takeaways, Netflix and Zoom Pro. Only three months into the first lockdown, Netflix, an online streaming subscription service, announced that 16 million people had created new accounts.
This was double the amount of new sign-ups that the service saw a year prior in 2019. Digital workout subscriptions have also seen a rise in demand, with individuals unable to access gyms and exercise classes. Of course, with households indoors at this point more than ever before, spending on groceries and household essentials remains higher than it was in 2019, according to the Institute of Fiscal Studies (IFS).
Household spending has not seen a consistent rise or fall in the past year. In fact, it has been anything but consistent. Groceries, subscription services and takeaways saw an increase in spending, while transport, holidays and hospitality saw substantial falls. This of course has depended on individual financial circumstances, but spending across all boards and incomes have certainly seen dramatic changes in the past year.