Our post-Covid economy recovery is mainly reliant on consumers spending their accidental savings accumulated during the lockdown.
However, new research suggests that our savings priorities have changed due to the pandemic.
As a result, we could be about to witness a form of post-war austerity last experienced in the late 1990s.
The research comes from the UK Consumer Insight Panel. It throws a spanner in the Bank of England’s forecast that consumers are about to spend a significant amount of the £180 billion in amassed lockdown savings.
Instead of splashing the cash, mindsets appear to have shifted towards prudence, prompted by the fear or reality of financial hardship.
The research was carried out by Ipsos MORI and suggests a sharp decline in hedonism in 2021, with more people disagreeing with a ‘live for today’ mantra than agreeing.
It’s the first time since 1999 that more people have disagreed than agreed with a live for today mantra.
The research also found that young people are more likely to live for today, with 61% of Gen Z and 50% of millennials agreeing with this sentiment. However, 39% of Gen X and 42% of Baby Boomers agreed with a live for today approach.
Turning to financial wellbeing, 51% of people in the UK believe it is about having a financial safety net in place, but 20% think it’s about spending money.
58% of respondents believe their spending levels will remain the same or decline in the coming months.
When asked why this spending forecast, 75% said their experience of the pandemic has made them want to save more to protect themselves against risk and uncertainty.
In response to the findings, the UK Consumer Insight Panel is calling for an increased focus on financial wellbeing, as those who are financially worse off suffered the most during the pandemic.
They would like to see Buy Now Pay Later schemes regulated, so consumers are protected from getting into problem debt.
The Panel also wants to see online platforms given a legal responsibility to take fraud and scams as part of the new Online Safety Bill.
Joe Garner, chief executive of Nationwide Building Society, one of the members of the UK Consumer Insight Panel, 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, who carried out the research, said:
“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.”