What do you do with £23bn? Save it!
28 April 2020The pandemic and subsequent lockdown have had many significant and tragic effects around the globe. Statistics and numbers are becoming the norm in noting variances in our lives as each aspect of our changed world is measured.
With time on your hands, we believe it is worthwhile taking a good look at your household finances sooner rather than later to see if savings can be made, a great opportunity to take a real look at your household and financial planning.
Don't worry if you don't feel up to it, because others have looked at this position across the UK and the numbers are staggering. Both the Office for National Statistics (ONS)and Centre for Economics and Business Research (CEBR) have made estimates and then studied what will happen with spending, now that the shops, restaurants, pubs and leisure facilities are closed. The CEBR study is from 24 April 2020 and more can be found here: https://cebr.com/reports/23-billion-in-excess-savings-set-to-accumulate-in-q2-as-consumer-spending-declines-dramatically/
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Here are some of their findings, along with the ONS, looking at the second quarter in the UK:
CEBR: Expects excess household savings of around £23 billion to accumulate, as many rein in their expenditure.
CEBR: Average UK households will see their monthly incomes drop by £515 in Q2 as a result of the labour market impacts of the pandemic.
ONS: In 2019, the ONS measured the average share of household disposable income that is saved, to stand at around 6%.
CEBR: During the lockdown, the CEBR expects this ratio to rise to over 20%.
These are significant changes in past patterns of spending, and for some households the potential drop in income will be difficult. It is also clear that for some, excess funds will be available, even when taking into account the only real alternative of internet shopping. Spending on clothes, shoes and textiles as examples are down 35% as a monthly decline, with food spending up 10%. Overall retail sales volumes are down by 5.1% in March, according to the ONS.
These are difficult times for most, and many fear greater concerns than their money position. However, the pandemic will end, and we will in the future return to 'normal' lives, although the new normal may well look different to times of old, like 2019. Take this time to take a look at your financial planning, your income and outgoings and try and put some extra funds aside, even if it is to enjoy yourself more when this ends.
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
Director
Chartered Financial Planner
Chapters Financial Limited
