Things are looking up for the UK economy, from the second half of 2020 there has been an increase in household savings – raising hopes for economic recovery this year.
Britain’s recovery during the second half of 2020 was much stronger than expected. This has been estimated by official figures; they suggest that households put away more money into savings than in the first half of 2020.
The ONS suggests the economy has expanded by 16.9% and 1.3% in the last two quarters of 2020. This displays a significant rise from 16.1% and 1% recorded in the first two quarters.
Disposable incomes were flat over the year, they rose by a mere 0.1% (post adjustments for inflation). However, the exceptional circumstances in 2020, lead to a lack of things to spend money on. This meant many households accumulated a level of savings that the ONS said was higher than it had previously expected.
The saving rate, which is measured as cash saved as a share of disposable income, increased from 14.3% in the third quarter of 2020 to 16.1% in the fourth quarter.
Investec Economist, Philip Shaw stated: “Our estimate of excess or pent-up savings now stands at £121bn, equivalent to close to 10% of total household consumption in cash terms last year.”
Surveys undertaken by the Institute for Directors (IoD) and the British Chambers of Commerce (BCC) showed that most small and medium-sized business owners expected growth to accelerate during the year as consumers returned to high streets and face-to-face contact resumed.
The IoD suggested that businesses were beginning to onboard staff due to the increased optimism and expected growth.
Last year the 9.8% drop in GDP marked the sharpest decrease since official records began. Bank of England data demonstrates that it was the biggest fall since 1709. So, these latest ONS figures suggesting a boom in the UK economy is gladly welcomed.
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