British families are ready to fuel a rapid return to prosperity with a multibillion-pound spending spree, according to a senior Bank of England policymaker.
With the vaccine rollout protecting more than 13 million of the most vulnerable people, the BoE’s Andy Haldane said the economy was about to turn “a decisive corner with enormous amounts of pent-up financial energy waiting to be released, like a coiled spring”.
Echoing comments made by BoE governor Andrew Bailey last weekend, Haldane – the Bank’s chief economist – said most people were desperate to socialise again and spend money on going out for meals.
By June, those Britons who have seen their incomes remain much the same but their spending plummet during three lockdowns will have amassed £250bn in savings, equivalent to 20% of the amount households spend each year.
Writing in the Daily Mail on Friday, Haldane said the Bank had conservatively estimated around 5%.
“I think there is the potential for much more, perhaps even most, of this savings pool to leak into the economy, fuelling a faster recovery,” he said.
“Why? Because people are not just desperate to get their lives back, but also to catch up on the social lives they have lost over the past 12 months.”
The central bank recently cut its forecast for growth in the first quarter of the year to take account of the third lockdown. It said the economy would shrink by 4.25% between January and March as shops closed and people were advised to stay at home.
But it upgraded the outlook for the second half of the year as vaccinations allow the economy to return to brisk growth and said the recovery would be complete by March 2022.
Rival forecasters have been more circumspect and have estimated a slower recovery, more like the five years Britain took to climb back from the 2008 financial crash.
The National Institute for Economic and Social Research said earlier this week that growth would be tepid while many workers feared they might lose their jobs, wages growth remained low and businesses held back investment.
Haldane dismissed these concerns, saying: “The potential for a savings-led boost to demand is not confined to households.
“While many companies have faced difficult times over the past year, a significant number have amassed a war-chest of cash, currently running at around £100bn. Will this be spent?
“Business investment has been laid low over recent years by the uncertainties around first Brexit and latterly Covid.
“But with the risks from both now diminishing fast, and with consumer demand set to rise rapidly, the conditions are in place for businesses to splash some of their cash, too.
“That would be good news for jobs, helping to recover some of the million lost so far in this crisis.”