The UK recovery should be aided by households spending some of their excess savings built up during the pandemic. The potential boost from this source is very uncertain, although we think it may not be as large as some hope. We think around 5% of the savings stockpile could be spent over 2021–2022. ▀ The amount of savings that households have accumulated – to a large extent involuntarily – is unprecedented in the post‐war era. Most of this extra cash is held by the better‐off, who are relatively upbeat about their financial prospects. ▀ But higher‐earners have a relatively low propensity to spend, and historical episodes where consumption was artificially curtailed saw limited dissaving afterward. In addition, consumer services have borne the brunt of the lockdowns, which will also limit the surge in savings‐fuelled, pent‐up demand.
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