Fears over economic recovery after the 'pingdemic' prompted households to save further £7bn
The Bank's former chief economist, Andy Haldane, was relying on this pile of cash to boost Britain's recovery when Covid restrictions lifted
Deposits are still piling up, prompting concerns that a post-pandemic rebound may have already stalled
Britons saved another £7.1bn in July as the pingdemic and Covid worries prompted shoppers to hold onto their cash.
Households have been squirrelling away money since the pandemic hit as lockdowns wiped out opportunities to spend.
The rise in savings in July took the total stowed in bank accounts since the outbreak of Covid in UK to almost £230bn, says the Bank of England.
The Bank's former chief economist, Andy Haldane, was relying on this pile of cash to boost Britain's recovery when Covid restrictions lifted, as accidental savers rushed to spend it. Writing in the Mail this year, Haldane said the economy was 'poised like a coiled spring' to bounce back.
But deposits are still piling up, prompting concerns that a post-pandemic rebound may have already stalled. Ruth Gregory, senior UK economist at Capital Economics, said the figures 'do little to ease mounting concerns that the resurgence in virus cases in July and so - called 'pingdemic' brought the consumer recovery to a halt'.
Though the £7.1bn was much smaller than the £10.2bn they tucked away in June, it was much larger than the average of £4.7bn a month which households were saving pre-pandemic. Gregory said: 'This provides a further sign that rising virus cases sapped households' willingness to spend in July.'
She added that there was now a growing risk that Capital Economics' forecasts – which predicted the economy would grow by 0.5pc in July, and return to its pre-pandemic size by October – would be missed. The figures will be a fly in the ointment for Chancellor Rishi Sunak, who is preparing for a tough spending review next month.
A vigorous rebound and sturdy economic growth would boost tax income, helping him get the national debt under control and plug spending holes in areas such as the NHS, transport and education. But households were still paying off credit card debt in July, rather than borrowing more to support spending.
MORTGAGE DEBT DOWN Households paid off more than they borrowed in mortgage debt in July – for only the second time in a decade. A net £1.4bn was repaid, following record net borrowing in June of £17.7bn, says Bank of England data. The cause was the end of the stamp duty holiday, as the temporary tax relief started to fall away from July 1. Mortgage borrowers had rushed to get their purchases completed by June 30. Lenders' approvals for house purchases are at their lowest level since July 2020. But Paul Stockwell, of Gatehouse Bank, said: 'There remains very high demand and that's going to be reflected in property price behaviour over the remainder of this year.'
Laura Suter, head of personal finance at AJ Bell, said: 'In July net borrowing was zero, compared to an average borrowing figure of £1.2bn a month in pre-pandemic times.' The pingdemic, where millions of workers were told to self-isolate, meant businesses had to close due to a lack of staff, and households were unable to splash their cash.
Shortages of HGV drivers, combined with soaring demand for certain goods, also caused supply bottlenecks. Businesses from Nando's to McDonald's ran out of essentials like chicken and milkshakes and a lack of microchips has hit the car industry. But economists have conceded there may be a second surge in spending when Covid worries ease again.
Suter added: 'It's clear to see why people might decide to get out and spend their money instead of save it, as interest rates on deposits fell yet again to another historic low.'
A fresh survey from the Confederation of British Industry (CBI) showed businesses were still seeing strong demand – activity in the private sector for the three months to August grew at the fastest pace since May 2014.
Consumer services firms, such as shops and bars, saw activity pick up at the fastest pace since February 2018.
Anna Leach, deputy chief economist at the CBI, said: 'However, there are several issues creating headaches, which must not be ignored if we are to regain lost economic ground. Evidence of labour shortages has been growing – in some cases, having a material impact on operations. Disruption to global supply chains has led to sharp rises in material and shipping costs, adding further pressure.'