Economic Perspectives –

Record household savings in 2020: ready to boost the economy when lockdown lifted

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


6th April 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK economic data:

  • The ONS made a very modest revision to GDP for the year 2020, to show an annual fall of 9.8% compared with the previous estimate of 9.9%.
  • The household sector’s saving ratio leapt to a record high of 16.3% in 2020, as household consumption fell back, compared with 2019’s 6.8%. 
  • The current account of the balance of payments deficit widened in 2020Q4, mainly reflecting a worsening goods deficit. Imports were especially high ahead of the end of the transition period.
  • The current account of the balance of payments deficit modestly widened in 2020. The goods deficit fell, but the primary income deficit (in particular) widened as credits fell more than debits. 
  • Households continued to make net repayments of consumer credit in February (£1.2bn).
  • Net mortgage borrowing remained strong in February (£6.2bn, the strongest since March 2016) whilst mortgage approvals for house purchase was a high 87,700 in February.
  • Broad money (M4ex) rose £15.8bn in February, driven by a rise in households’ deposits of £17.1bn (MOM). The M4ex growth rate was 15.2% (YOY) in February.  
  • In the 12-months to February 2021, money holdings of the household sector rose by nearly £180bn, whilst money holdings of private non-financial companies (PNFCs) rose by around £125bn.
  • Nationwide reported that house prices fell by 0.2% (MOM) in March and were 5.7% higher YOY (down from 6.9% in February).
  • The SMMT reported that car production in February was 14% down YOY, the weakest February performance in more than a decade. 

Ruth Lea said “The latest data on the saving ratio and increased money holdings of the household sector confirm that households are holding record savings. It is more than likely that a good proportion of these increased savings is likely to be spent, when lockdown is lifted, boosting household consumption and hence GDP. Bank Chief Economist Andy Haldane’s recent remark that the UK economy is like a ‘coiled spring’ ready to release large amounts of ‘pent-up financial energy’, after the easing of restrictions, seems perfectly reasonable.”



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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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