Although there has been considerable easing of Covid-19 lockdown limitations on the UK economy, demand has remained very weak, especially for bigger-ticket discretionary purchases. BDN financial editor Roger Willis reports.
The bike trade has bucked this trend to some extent, as commuters returning to work have increasingly chosen the much safer individual transport option of small PTWs, as an alternative to riding crowded buses or trains. Indeed, sales of scooters and 125cc motorcycles are likely to have achieved net annualised growth by August, irrespective of coronavirus disruption. But a similar resurgence hasn’t spread to acquisition of larger machines for recreational deployment, to anything like the same degree.
According to the Economist magazine, restrictions on shopping, reduced commuting as many staff continue to work from home, reluctance to patronise reopening hospitality businesses — pubs and restaurants — and avoidance of other seductions to splash money around have left households sitting on substantial cash piles.
Such holdings, principally in the form of bank deposits, climbed by a record £25.9bn in May, following sharp rises in March and April. Net lending for consumer credit provision also fell by £15.8bn across the same period.
Concerns about an imminent drastic increase in unemployment, as government subsidies for furloughed workers and distressed firms taper off, and the resultant likelihood of a severe recession in the next few months are clearly to the fore, encouraging tight-fistedness.
The Office for Budget Responsibility (OBR), a fiscal watchdog which tries to keep the government honest, estimated that the UK household savings ratio — income retained instead of spent on consumption — leapt from 5% in February to almost 30% at peak lockdown. Latest OBR calculations suggest this ratio will stick above 10% for the foreseeable future, which is hardly good news for economic recovery.
The possibility of turmoil from a no-deal Brexit in December, potentially engendering a ruinous hike in the consumer price index, will only add to this witches’ cauldron.