UK households bolstered their savings in early 2021 lockdown

British households raised their savings sharply in early 2021 as coronavirus lockdowns closed bars, restaurants and many shops, potentially boosting their spending power as the restrictions are gradually lifted.

The country’s savings ratio, which measures the income households saved as a proportion of their disposable income, rose to 19.9 per cent from 16.1 per cent in the fourth quarter of 2020, the Office for National Statistics said.

That was the second-highest savings ratio on record after a leap to 25.9 per cent in the April-June period last year during the first coronavirus lockdowns.

The data also showed Britain’s economy shrank a bit more than previously thought in the January-March period as gross domestic product contracted by 1.6 per cent in the first quarter.

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The ONS had previously estimated GDP shrank by 1.5 per cent in the first quarter.

Household spending was weaker than first estimated.

The hit to GDP in early 2021 was just a fraction of the roughly 20 per cent slump in the second quarter of 2020 when Britain was in its first lockdown. Many businesses have adapted to the rules by, for example, ramping up their online operations.

Separate figures from the ONS showed Britain’s current account deficit narrowed to £12.83 billion in the first quarter as the tightening of coronavirus rules hit the economy and hurt demand for imports.

The balance of payments shortfall was equivalent to 2.4 per cent of GDP compared with 4.8 per cent in the fourth quarter of 2020. – Reuters