Britons Reduce Spending and Lift Savings in Virus Crunch

Britons responded to the coronavirus crisis by slashing spending and saving more as the economy slipped into what may be the deepest slump in at least a century.

Households saved more of their disposable income in the first quarter than at any time for four years, thanks in part to the closure of all but essential stores after the country went into lockdown on March 23. Nominal spending fell an unprecedented 9.5 billion pounds ($11.7 billion), or almost 3%, as less was spent on cars, eating out, hotel stays and clothes. By contrast, incomes were down only marginally.

With government wage subsides meaning that furloughed workers are experiencing only a limited loss of income, the saving ratio -- which reached 8.6% last quarter -- is expected to climb further. How quickly the economy bounces back will largely be determined by whether people feel confident enough to spend their spare cash as the lockdown restrictions ease.

The Office for National Statistics said Tuesday the economy shrank by 2.2%, slightly more than the 2% previously estimated, but the real damage inflicted by the pandemic came in the second quarter. Gross domestic product dropped by over 20% in April and jobless claims soared, leaving many Britons worried about the future.