People have set aside £140bn over past year with £100bn on corporate balance sheets
Cash-heavy households and businesses are set to boost the UK’s economic recovery over the coming year as the spend money accumulated during lockdown, the chancellor has said.
People have set aside around £140bn over the past year, with £100bn on corporate balance sheets, as confidence is getting back to levels seen before the pandemic and economic activity is rising at a fast rate, Sunak told The Wall Street Journal’s CEO Council Summit.
“As we look forward to reopening over the coming weeks and months, there are signs to be cautiously optimistic and we can see that in the data. I’m hopeful that will be sustained through the rest of the year,” he said.
Sunak’s comments were timely, coming soon after a UK PMI survey revealed that UK manufacturing grew at the fastest rate in nearly 27 years in April.
Mortgage lending has also spiked, up by £11.8bn in March, as households sought to take advantage of the stamp duty holiday on the first £500,000 of a purchase before the policy is withdrawn in June.
In recent weeks, economists have upgraded projections for GDP growth for the UK this year from 5% cent to 7%, a pace last seen in 1941, with the Bank of England expected to confirm the rapid recovery in its latest forecasts tomorrow.
“We are seeing consumer confidence back to pre-pandemic levels. Chief financial officers are very positive. Various manufacturing and services indices are trading above [trend] and we know that there is an enormous amount of excess savings both in the household sector, approaching £140 billion, and £100 billion sitting on corporate balance sheets,” Sunak said.
“We have tried to put things in place to unlock some of that cash, particularly the [corporation tax] super deduction. The signs are promising. Our policy a year ago was to help people and protect businesses so that when we got to this point we could bounce back strongly.”
Britain suffered its biggest recession in three hundred years last year, as the economy shrank by 9.8%. However, this time around, households and companies have built up an excess of cash which could go some way to supporting the UK’s recovery.
