IFS: Brits unlikely to spend pandemic savings anytime soon

Brits are unlikely to dip into their pandemic-induced savings and splash the cash any time soon.

A greater propensity to save, especially among richer households, and maintaining savings habits adopted during the Covid-19 crisis will deter Brits from spending, according to the economic think tank the Institute for Fiscal Studies (IFS).

Normal spending patterns were scuppered by the pandemic due to strict lockdown measures preventing consumers from spending on services.

Spending on services contracted 30 per cent compared to previous recessions.

The sudden release of pent-up demand for meals out and heading to the pub in the immediate aftermath of the Covid-unlocking has been exhausted, meaning consumer spending is likely to pull back in the coming months.

Peter Levell, associate director at the IFS, said: “Falls in purchases during the recession were driven by reduced services demand, which is less likely to have been ‘pent up’ to be released immediately in the post-recession period.”

Wealthier households are much less likely to spend additional money, instead opting to save excess income, while poorer Brits, who were more likely to have experienced a drop in the value of their wealth during the pandemic, tend to spend additional income on cancelling out debt, the IFS found.

Consumer spending will still run hot, fuelling inflation as strong demand rubs up against constricted supply, the IFS said.

Inflation currently stands at 3.1 per cent, according to the Office for National Statistics. The Bank of England expects it to hit five per cent in April next year