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Has coronavirus changed financial priorities forever?

Pandemic Frugality may see Brits saving £164bn in 2021

According to a new study by the Centre for Economics and Business Research (CEBR) and Scottish Friendly, UK savers are set to put away a total of £164bn worth of savings and investments this year in a sign that coronavirus has changed how we save as a nation.

Despite the financial challenges many families faced, household savings still reached record levels in 2020, with coronavirus curbing many people’s spending and allowing Brits to accumulate £2,674 each in cash savings alone, on average, since the start of the crisis.

The new analysis suggests Brits will continue to save at levels well above the historical average, although there will remain a high degree of variation in households’ capacity to save.

Has coronavirus changed financial priorities forever?

While savings are lower than the record 16% of household income stashed away by Brits in 2020, they are still well above the long-term average of 8.5% from 2000-2019. If UK adults continue this trend through 2021 and set aside £3,023 each, the total will reach £164bn by the end of the year.

The data suggests that the pandemic has permanently – or at least semi-permanently – altered the nation’s attitude towards savings.

CEBR’s analysis of previous crises reveals that households saved significantly higher proportions of their income in the year after each of the past four major economic downturns than they did during the year preceding each of these downturns.

For example, households saved on average 8% of their income in the run-up to the 2008-09 financial crisis, but this jumped to 12% in the year after the recession.

Similarly, British households tucked away 11% of their income, on average, before the 1990-91 recession but 14% in the year after it.

Younger generations now more inclined to save than ever before

Interviews with more than 4,000 British adults surveyed reveal that many Brits plan to save a much higher proportion of their income after coronavirus restrictions are lifted than they did before.

Overall, nearly four in 10 (39%) of British adults – equivalent to 20 million people – say they plan to save more than they did before coronavirus, including 22% who say they plan to save significantly more.

Broken down by age, it is clear that the pandemic has had by far the biggest effect on the savings habits of younger generations. Some 47% of those aged 18-24 plan to save a higher proportion of their income after the pandemic than before, rising to 55% of those aged 25-34.

Meanwhile, less than a quarter (24%) of respondents aged 55-64 plan to save more than they did before, with 39% saying that the pandemic will have no influence on their savings habits.

Kevin Brown, savings specialist at Scottish Friendly said: “Recessions in the UK have typically led to a sustained increase in retail saving but there has never been a spike as severe as there was in 2020.

“Maintaining this level of saving is unsustainable without continued restrictions on spending, but we still expect that collectively households will put away a bigger share of their income this year than they did pre-2020.”

Increased caution among investors in 2021

According to research by trading brokers HYCM, UK investors are extremely cautious in 2021. Results showed that around 65% of UK investors believe the true impact of the pandemic on the UK economy has not yet been seen, and that it will be even harder felt in 2022, according to a survey of 885 by HYCM.

The survey found that three in five investors plan to adopt a more conservative investment strategy by focusing on security rather than returns in the coming months. This has boosted some investment sectors, particularly those with low-correlation or in markets earmarked for growth such as climate change.

The majority of investors have completely altered their strategies in the past 18 months, with the economic landscape constantly shifting and changing. Nevertheless, there are major concerns of hyperinflation when Britain eventually emerges from the most significant crisis the country has faced.

This has led to investors seeking opportunities in the short term that will protect their cash against this potentially critical situation. However, these opportunities almost always require intensive due diligence when considering them in the current investment climate.

How you can protect your savings with Ignite Invest

Ignite Invest specialise in sourcing the most secure low-correlation opportunities available on the UK investment market. Our long history and experience in this sector has allowed us the privilege of hearing about new and exciting opportunities before they come to the wider market if at all.

We can connect you with investment products that deliver a profitable hedge against inflation and a high-degree of security. We understand that the current time dictates that investors should seek security over reward but we take the time to source new, low-correlation products that offer both exciting returns with minimal risk.

Find out more about how you can ignite your investment portfolio to achieve the best possible returns in the worst possible climate. Contact one of our advisers for more information today here.

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