Brits squirrelled away their wages, profits, and pandemic handouts during this year’s spring lockdown, taking household savings to near-record levels, according to official figures.
The data from the Office for National Statistics also show that GDP contracted during that first quarter of the year by more than expected, dropping by 1.6 percent compared with the previous 1.5 percent estimate.
The drag of the 2021 lockdown kept GDP below pre-pandemic levels by 8.8 percent, but it was less marked than during the 2020 spring lockdown when it dropped by 20 percent.
But the finer-grained monthly data give a more positive picture, showing that growth jumped from 0.8 percent in February to 2.4 percent in March. In April the jump was 2.3 percent and the Bank of England’s outgoing Chief Economist Andy Haldane recently said the economy was going “gangbusters.”
The latest data come amid growing pressure on the government to stick to its pledge on removing all pandemic restrictions on July 19, and as the government prepares to wind down the furlough scheme from tomorrow.
Martin Beck, senior economic adviser to the EY ITEM Club, said GDP will recover strongly in the second quarter as households spend some of the savings built up in lockdowns.
He said, “The delay to removing remaining restrictions and any effect to confidence from the recent rise in COVID-19 infections present potential risks to this forecast though.”
Julian Jessop, economics fellow at free market think tank the Institute of Economic Affairs, said the figures showed that “pent-up demand may prove to be even stronger.”
“More timely business surveys already suggest that overall economic activity (as measured by GDP) will be back to pre-COVID levels as soon as the third quarter, with employment picking up well,” he said in a statement.
Jessop said that means the government should press ahead with winding down the furlough scheme as planned from July 1.
“It is increasingly clear that the furlough scheme is now contributing to staff shortages and actually holding back the recovery, including in hospitality. With most of the economy open again, people should be encouraged to find new jobs, instead of being locked into their old ones.”
Jonathan Athow, deputy national statistician at the ONS, said: “Today’s updated GDP figures show the same picture as our earlier estimate, with schools, hospitality, and retail all hit by the reimposition of the lockdown in January and February, with some recovery in March.
“With many services unavailable, households again saved at record levels with only last spring seeing more saved.”
