Caution Reigns as U.K. Consumers Repay Loans, Add to Savings

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Britons remain cautious about splashing out following the lifting of pandemic restrictions, figures published Tuesday show. 

Consumers repaid unsecured debt in July for the first time in five months and households banked an additional 7.1 billion pounds ($9.8 billion) in deposits, well above the pre-pandemic average.

Caution Reigns as U.K. Consumers Repay Loans, Add to Savings

“Caution prevailed at the end of social restrictions (‘Freedom Day’) in mid-July, instead of a spending splurge being unleashed,” wrote Sandra Horsfield at Investec in a note Tuesday. Excess savings climbed to 148 billion pounds, she estimated. 

The figures tally with a sharp drop in retail sales last month. It suggests consumer confidence was sapped by a resurgence of coronavirus cases and a “pingdemic” of workers forced to self-isolate after coming into contact with someone who tested positive for Covid-19.

Bank of England officials are relying on consumer spending to sustain the economic recovery from last year’s pandemic-induced slump, with the central bank anticipating households will run down around 10% of their additional savings. 

©2021 Bloomberg L.P.

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