Get ready for the Great British shopping spree

Get ready for the Great British shopping spree

About John Ashcroft


We are delighted to be partnering with Dr John Ashcroft to bring you the latest in a series of quarterly briefings and monthly updates on the UK and world economy. We will be looking at markets, growth and inflation and what this means for the UK finding its feet post-Brexit on the globally stage.


John Ashcroft PhD, BSC.(Econ) FRSA CBIM is author of The Saturday Economist, a weekly update on the UK and World Economy and former Chief Executive of Coloroll plc, John will be collaborating with us to provide insight on economic and sector specific issues facing our clients and contacts.

John Ashcroft 150x150

John Ashcroft

The Saturday Economist

The UK economy is on the brink of bouncing back. In this guest blog, John Ashcroft from The Saturday Economist believes hospitality, clothing retail and tourism are at the front of the queue.

The shops are open, the crowds are back on the streets, confidence is high, and people are ready to spend. According to the Deloitte consumer tracker, there was a record rise in consumer confidence in the first three months of 2021.

Ian Stewart, chief economist at Deloitte, believes the UK is primed for a sharp snap-back in consumer activity. “High levels of saving, the successful vaccination rollout and the easing of the lockdown set the stage for a surge in spending over the coming months,” he said.

In March, the Office for Budget Responsibility (OBR) suggested that households have accumulated £180 billion in forced savings as a result of the lockdowns. And the Chancellor believes these excess savings could now stimulate growth.

Rishi Sunak has urged households to get out and spend. “Go have fun and spend money,” he said, adding that people should “do their bit” by spending savings they had built up during the lockdown.

Savings have increased by £180 billion

Household spending fell by £136 billion last year, but incomes increased by £15 billion. The effective nominal savings were £150 billion over the 12-month period. Add in a further quarter of lock down in 2021, and the quantum of “savings” increases to over £180 billion.

But expenditure has been curtailed by restrictions in “opportunities to spend”. Spending on restaurants and hotels was down by 42 per cent. Transport spending was down by over 30 per cent. Clothing and footwear sales were down by 13 per cent. Holiday spending was down by over 60 per cent.

Incomes were supported by the relatively low increase in unemployment, an increase in universal credit claims and the introduction of the furlough scheme. Without Treasury intervention, the household loss would have been 9 per cent of total incomes.

What happens next?

Households have been accumulating savings and cutting back borrowing. We estimate some £25 billion of repayments have been made on credit cards and other loans since March last year, using Bank of England data.

The OBR is forecasting a strong recovery in consumption in its central forecast over the second half of 2021. This is primarily a consequence of the economy reopening, as restrictions are relaxed. That means forecasts for growth in the economy are therefore being revised up.

The EY ITEM club recently joined the 6 per cent club, projecting growth of 6.8 per cent this year. Bloomberg and JP Morgan revised growth forecasts to seven per cent. The latest estimate from Goldman Sachs suggests the UK will outpace the US this year with growth of 7.8 per cent.

Not everyone is ready to spend

But survey evidence suggests a significant share of accumulated savings will not be spent immediately.

According to the BoE NMG survey, just 10 per cent of households that increased savings, plan to spend at least part of the money right now. Seventy per cent plan to continue to hold savings in their bank account. Others plan to use savings to pay off debts, invest, or top up their pensions. They may even buy Bitcoin.

According to the latest Bank of England Ipsos/MORI household survey, 13 per cent of respondents expect to catch up some of their lost spending once restrictions are lifted. The Bank forecasts assume just a small fraction of households intend to spend their savings in the short term. Just 5 per cent of the quantum saved will be released this year, according to the Bank of England forecasts.

Research by Scottish Friendly and the Centre for Economics and Business Research (CEBR) found that households intend to take more holidays, travel, and eat out in cafes and restaurants. (They will also build back wardrobes in the process).

The report said a quarter of the lockdown savings accumulated by March 2020 would be spent. “Britons are planning to use a hefty chunk of the savings built up over the past year to go on a £50 billion spending spree once restrictions are lifted,” it revealed.

So, what can we expect?

Our forecasts suggest household spending will increase by 7.9 per cent this year and 7.4 per cent in 2022. This is consistent with our forecasts of 6 per cent real GDP growth. Spending could be higher.

We break down the forecast into major spending categories. Major beneficiaries will be restaurants and hotels, up 42 per cent; clothing up 32 per cent; net tourism up 88 per cent; and transport up 15 per cent.

But what could go wrong? Shoppers may experience higher prices in the process as businesses try to recovery lost profits. Prices are increasing as a result of higher shipping and transport costs. Limited occupancy levels are pushing up operating costs. Then of course there is Brexit: the nightmare of disruption continues.

For the moment, the shops are open, the crowds are back on the streets, confidence is high, consumers have the money, and they are ready to spend.

Disclaimer: The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment or general consultancy advice.

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