End of consumer hedonism? UK households reluctant to spend £180 billion of Covid savings

Research shows that lockdown has flipped the nation’s priorities.

Expectation that Britain will see a return to rampant consumerism after the pandemic could be wide of the mark as research released by Swindon-based Nationwide reveals the nation has adopted a type of post-war austerity last seen in the late nineties.

The Bank of England estimates households have amassed an additional £180 billion in savings since the first lockdown. However, lockdown restrictions, combined with the fear or reality of financial hardship, have instilled a more prudent mindset for many.

Ipsos MORI research commissioned by the UK Consumer Insight Panel – a new cross-sector group comprising some of Britain’s biggest businesses and consumer groups – signals an abrupt drop in hedonism in 2021, with more people disagreeing with a ‘live for today’ mantra than agreeing, marking the first time since 1999 this has been the case.

Pointing to a generational divide, young people are much more likely to ‘live for today’, with the research showing 61 per cent of Gen Z and 50 per cent of Millennials think this way, compared to 39 per cent and 42 per cent for Generation X and Baby Boomers respectively.

Reinforcing this finding, 51 per cent of people in the UK believe financial wellbeing is about having a financial safety net, compared with 20 per cent who think that it is about spending money.  Furthermore, almost six in ten say their spending will either remain the same or decline in the coming months, with three quarters saying the pandemic has made them want to save more to help protect themselves against risk and uncertainty.

While there appears to be a reluctance to spend for those who have built up savings, around one in four saw their savings decrease in lockdown, rising to 29 per cent for those with household income of less than £20,000 per year. This lowest income group is the only one to record a net loss in savings.

More than half say they are spending or considering spending less as a result of Covid-19, while more than four in ten are saving more. This shift towards lower spending and higher saving comes despite Ipsos’ data showing that optimism for the UK has overtaken pessimism for the first time since 2013 (41% vs 32%).

The Panel, which consists of Asda, Citizens Advice, Fairer Finance, Ipsos MORI, Kingfisher, Money Saving Expert, Nationwide Building Society, Resolution Foundation and Which?, was established to provide insights and ideas to promote a fair economic recovery.

Nationwide notes that recovery in city centre branch footfall remains slow, while branches in smaller markets have seen a quicker recovery. However, it is those in areas with additional retail outlets (clothes etc) that appear to be attracting more people at a faster rate today. The research shows many are keen to return to real-life shopping and that consumer comfort is higher in local high streets and retail parks than cities or shopping malls.