Bank of England data has shown that Britons saved a record amount during the Covid-19 pandemic.
According to the latest figures, £157 billion was saved during lockdown, as non-essential shops and travel remained closed. The trend continued into May with UK households putting aside £52 billion.
At the same time, people repaid a further £4.6 billion of consumer credit in May, adding to the £7.4 billion repaid in April and £3.8 billion in March.
Laura Suter, personal finance analyst, AJ Bell, said: “Whether it’s the cost of the annual summer holiday or the hundreds usually spent each month on commuting or childcare costs, many households are finding it easy to save cash at the moment. As lockdown eases and we can all get out a bit more to spend in shops, bars, restaurants and trips away we’ll see the amount we’re all saving fall.
“One blow for these savers is that interest rates fell again in May, as banks are inundated with savings cash and don’t need to offer attractive rates to draw in customers. This means the average easy-access account is now paying 0.29% – marking a new record low since 2016.”
However, Suter warned that the figures mask the financial divide in the UK, with some people who’ve lost their jobs or been furloughed having to take on more debt.
Meanwhile, separate data from eToro found that Britons with unspent discretionary income are set to accumulate £75.5 billion in savings in just three months, with individuals on course to save an average £1,434 each in the three months to June.
The amount saved will be double the previous quarterly record of £37.2 billion set in the first quarter of 2010.
eToro’s research also showed a shift in the way people approach and use money, with more than two fifths (42%) planning to keep their new savings habit even as lockdown eases. More than a third (37%) stopped using cash during lockdown, while an estimated 2.2 million plan to never use cash again. This is on top of the 5.5 million people who stopped using cash prior to the crisis.
Meanwhile, 9.4 million people have downloaded new apps and websites to manage their cash during lockdown and 14.4 million expect to increase their use of digital banking apps post-lockdown.
Iqbal V.Gandham, UK managing director, eToro, said: “Our research shows that lockdown has ushered in a revolution in terms of the way we manage, view and treat money.
“For many of course there have been significant challenges with debt and loss of income. However, in just a few short months, a significant proportion of the UK households that are in a position to set money aside have moved away from spending and cheap credit and turned to saving.
“At the same time, this pandemic has awoken in millions the idea that the stock market can be used as a potent means of generating wealth and prosperity, while many of us have also embraced new, digital ways of managing that wealth.
“The period of lockdown has severely impacted the economy and household finances, but one of the positives is that it has transformed how we engage with money, which will hopefully make many of us better equipped to manage our finances in the future.”
