Will coronavirus turn Britain into a nation of savers?

Linda J. Dodson

Coronavirus could accelerate existing consumer trends or create entire new ones. Analysts expect the shift to online shopping to be hastened as households rely more on deliveries during the lockdown, while health and wellness products are expected to receive a boost. And lockdowns could lead to more remote working, meaning less transport usage, more online classes and weaker spending on corporate events.

Ackerman says that consumers will return to brands they trust and locally produced products.

“Covid-19 is likely to be an accelerator of that hyper localism because I think at the moment consumers are wary about products that have gone through too many borders and hands touching them.”

Prices for shoppers could be lifted if Covid-19 accelerates this move towards deglobalisation. Companies could cut back on the sprawling global supply chains that proved vulnerable to disruption.

Gerard Lyons, the former economic adviser to Boris Johnson, is more cautious on the prospect of permanent changes in consumer behaviour after working for Asia-focused Standard Chartered in 2003 when the Sars epidemic broke out.

After an initial air travel lockdown – and predictions of the rise of video conferencing – he recalls old habits had returned after 18 months as travellers hopped back on to airlines.

He said: “I remember in the aftermath of the Sars crisis it was said at the time that it would have a profound impact on people, but it is very difficult to see in the data that it was the case.

“What Sars did was produce a sea change in how those countries and economies in east Asia prepared themselves for the next crisis.”

But the most important consumer trend for the economy will be caution. Economists are divided over how long-lasting the impact of coronavirus will be on spending levels but most agree the recovery will be slow.

Many forecasters warn that a recovery weaker than a V-shape is now likely and that the rebound will look more like a “Nike swoosh” or even a letter “U”. Households fearful of another economic shock from a second or multiple waves of infections could hold back spending, known as precautionary saving.

“People will want to prepare for this, and the way to prepare for this is to have a significant stash of cash,” says Gilles Moec, chief economist at AXA. “If you factor in the possibility of another lockdown in the third or fourth quarter, do you want to change your car now?”

That could mean a full recovery in consumption will not be made until a vaccine is produced.

“If you are seeing multiple peaks in the disease, it is much more likely that people expect the disease to keep coming back and therefore make more permanent changes to their behaviour,” says Jennifer McKeown, economist at Capital Economics. She believes tourism spending will be “permanently lower”.

Worse yet for economies would be an annual coronavirus wave, likely every winter. “If this is annual, it really will change the way the consumer behaves. The more it comes up the more risk averse the consumer will become,” warns Ackerman.

The effect of curbed consumption could be more pronounced in developed economies in the West given the outweighed reliance on shoppers and face-to-face services from haircuts to personal trainers.

Could coronavirus scare Britons into becoming a saving nation, like Germany? UK households are less thrifty than some of their international neighbours, with an average of 6.2pc of disposable income parked away for a rainy day at the end of 2019.

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