Bank of England Deputy Governor Ben Broadbent said UK households have now run down the majority of their pandemic savings, removing a vital crutch propping up the economy.
He said consumption in the UK has been “relatively weak” because a huge £200 billion ($243 billion) war chest of excess savings built up by households during the pandemic has “dwindled.”
“Measured correctly, which I think is just to compare those with nominal incomes ... much of that is gone,” said Broadbent Thursday at the European Central Bank conference on monetary policy.
The remarks suggest there will be growing pressure on the UK economy in the coming months because cash buffers have now been exhausted. Those were built up by more wealthy households during the pandemic when lockdowns prevented spending on many items including leisure, travel and restaurants.
He also said higher interest rates are feeding through more slowly than previously thought to households — but that the impact would become sharper in the months ahead. There are already signs in recent survey data of the economy weakening, stoking concerns that Britain risks being tipped into recession.
While Broadbent sees household consumption as weak, he did highlight pockets of strength, such as business investment in some areas including business-to-business services. “I wonder for how long they can remain strong,” he added.
