19 May 2021

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

  • Research from UK Consumer Insight Panel shows lockdown has flipped nation’s priorities
  • UK optimism rises, but caution leads to households prioritising savings over spending
  • Despite savings made by many, 1 in 4 households see savings reduce because of Covid
  • More people shunning ‘live for today’ mantra than endorsing it for the first time in 22 years
  • Panel outlines trends they are seeing, from rising footfall and optimism to worries about finances
  • Call for government and business to encourage smarter spending that supports a green recovery, wellbeing for lowest earners and champions safety for consumers

Expectation that Britain will see a return to rampant consumerism after the pandemic could be wide of the mark as research 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, with hopes for a summer spending spree, 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 and most respected 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  (58%) 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 (75%).

While there appears to be a reluctance to spend for those who have built up savings, around one in four (24%) 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, with 21 per cent seeing an increase but 29 per cent a decrease.

More than half (54%) say they are spending or considering spending less as a result of Covid-19, while more than four in ten (45%) 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. It believes the combination of renewed optimism and financial prudence could be key to helping unlock a better future for the UK, but only if consumers are helped by policies and incentives that will enable them to thrive and spend safely while encouraging them to spend smartly.

By channelling public and personal spending in a way that benefits the nation in the long term, it is hoped that a ‘K-shaped economic recovery’ – where affluent or struggling households further diverge due to the disproportionate impact of the pandemic – can be avoided at the same time as improving society.

The Panel is calling for action across three areas that it believes are essential for a sustainable economic recovery:

  • Green: Greater focus is needed to incentivise people to make their homes greener to ensure the UK can meet ambitious green targets. However, the research shows consumer interest in spending on green improvements to homes is currently limited. Reducing VAT on green products would also encourage more people to invest in making their homes sustainable.
  • Financial wellbeing: Those who are financially worse off have suffered most during the pandemic. Hard-pressed private renters who have built up significant arrears during Covid-19 should benefit from a combination of low-cost loans and grants to help repay debt in a way that is affordable.
  • Consumer protection: There’s an urgent need to address the growing scourge of fraud and scams. Online platforms must be given a legal responsibility, through the Online Safety Bill, to identify, remove and prevent fake and fraudulent content on their sites. The exponential growth of ‘Buy Now, Pay Later’ requires proposed regulation to be put in place as soon as possible in order to protect consumers from getting into unmanageable debt, particularly those who are vulnerable.

Speaking on behalf of the UK Consumer Insight Panel, Joe Garner, Chief Executive of Nationwide Building Society, said: “The pandemic has acted as a reset button to a long-term culture of consumer hedonism. Lockdown has had a reversing effect on how we see our money – from a means to spend to a means of protecting ourselves against uncertainty and focussing on what’s important. As we look ahead to a brighter future, we want to capitalise on this cautiousness by seeing more work being done to help consumers spend safely and for the benefit of society.

“We must protect those who are struggling financially, as they have been disproportionately impacted by the pandemic and we cannot let them slip through the net. We must also stop the growth of online scams and fraud by working together as businesses and sectors. And we must do what we can to encourage people to see the benefits of making their homes more energy-efficient through building awareness and offering incentives. It remains one of the biggest challenges of our time.”

Ben Page, CEO of Ipsos MORI, added: “The public are not yet ready for a Roaring Twenties moment: prudence on saving and spending prevails and hedonist tendencies are at a 20-year low”.

What the Panel is seeing:

  • Asda: Research from Asda’s latest Income Tracker shows the average family disposable income increased by 13.1 per cent year-on-year in March, meaning households were on average £28 better off a week compared to the same period last year when lockdown began. Asda is also seeing a notable increase in the number of customers feeling positive about the future.
  • Citizens Advice: More than a quarter of people have used ‘buy now, pay later’ in the last 12 months and four in ten are struggling to make payments, while 3.5 million are behind on Council Tax and 500,000 renters are in arrears; 58 per cent were not in financial hardship before Covid-19.
  • Fairer Finance: Rising concerns about how support taken on during the pandemic may have a lasting impact on some consumers’ ability to get credit in the future. They are also seeing a permanent change in the way that many people manage their banking and payments, as the decline in cash usage accelerated during the pandemic.
  • Money Saving Expert: The website has continued to see strong interest from users on Savings and Green issues.
  • Nationwide: 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.
  • Resolution Foundation: Research from the thinktank shows that UK households are far more likely to have experienced a severe income shock during the Covid-19 crisis than their French and German counterparts and are more likely to have taken on additional debt in response.
  • Which?: A Which? survey of investment scam victims found that four in 10 were targeted via online methods (10% via search engines and 9% through adverts on Facebook, while a separate survey found nine per cent have fallen victim to a purchase scam as a result of an advert on social media. The same percentage had also fallen victim to a scam via an advert on a search engine.

Notes to editors

Full details, including tables, will be published on the Ipsos MORI website: https://ipsos.uk/NationwideConsumerInsightPanel

Ipsos MORI interviewed a representative sample of 3,295 adults aged 16-74 living in the United Kingdom using its online access panel. Interviews were carried out between 29 April and 5 May 2021. Data has been weighted to the known offline population proportions for age, working status and social grade within gender, government office region and education. All polls are subject to a wide range of potential sources of error.

 About the UK Consumer Insight Panel

The UK Consumer Insight Panel is a cross-sector group that was initiated by Nationwide Building Society. It comprises of some of the UK’s largest and most respected retailers, think tanks and consumer rights organisations. It meets quarterly to identify and consider the rapidly changing issues and pressures faced by consumers today, currently dominated by Covid-19. Members include: In addition to the enhanced panel will include: Asda, Citizens Advice, Fairer Finance, Ipsos MORI, Kingfisher, Money Saving Expert, Nationwide Building Society, Resolution Foundation and Which?. The Panel builds on previous collaborative work Nationwide Building Society did in bringing together organisations to identify issues resulting from the UK leaving the EU back in 2016.