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Consumers switch from credit to cash as the retail sector gets back on its feet

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This year the theme of our Midsummer Retail Report is ‘learning to love retail again’ and the timing couldn’t be more apt.


Last year we saw a record level of UK household saving with almost £200 billion saved above normal levels. As the pandemic restrictions ease the taps have been turned on and a “vaccine bounce” in the consumer economy is increasingly evident.


During successive lockdowns, people worried about job security and the long-term prospects for the economy began to put aside cash for a rainy day. This took the household savings ratio – which normally stands around 8 per cent – to an all-time high of over 25 per cent by the second quarter of last year.

Interestingly, the recent year-on year surge in retail sales volumes, an elevated savings ratio and declines in household net debt data suggest that households are using pent up savings rather than credit to support this spending surge. April’s 38 per cent year-on-year increase in retail sales volumes was followed by a 22 per cent year-on-year rise in May reflecting some diversion of spending from retail to leisure. By the end of June the ONS reported that the volume of sales for the quarter was 12.2% higher than in Q1 2021.There may be life in the party as household bank balances continue to grow, albeit at a slower pace, but they are growing nonetheless. 

This sustained level of saving – which is still running at nearly twice the long-term average – may also mean that when the Government’s emergency economic supports ceases, these may support the transition back to normality. Savings may also provide support for the housing market which is key in supporting consumption and the UK retail sector. In our Winter Retail Report I wrote about the “flatpack bounce back” in which the stamp duty holiday was fuelling house buying and subsequent spend on DIY products and furniture. With an estimated £5,000 being spent by new homeowners on fitting and furnishing new properties, we predicted that around £10 billion of spending power could be unleashed into the DIY and household goods market. As the stamp duty holiday was extended, so too has the property market boom and the associated spending boost.

Given that strong demand is outstripping supply, inflation is increasing and some commentators fear that monetary policy could be tightened with interest rates rising sooner than expected. So far, the Bank of England as well as the European Central Bank indicate that they are willing to ignore what they see as a short-term spike in inflation as supply catches up with demand. There is little evidence of wage push inflation so the interest rate trajectory remains benign. If there is a threat to stability and interest rates it may be linked more to the vagaries of US monetary policy.

At the same time, we are entering a period of rapid change. If any lessons were learned from the pandemic, it is that massive change can be brought about almost with a flick of a switch, if there is a collective will to support it. I also see a young generation impatient for change. These two ingredients have set the stage for further massive changes in how we organise our economies and certainly how we organise what has traditionally been described as the retail trade.                     

This article was first published in EG on 29 June 2021.

About the Author:

Chief Economist, and Head of Research & Economics at Colliers, Walter Boettcher has more than 20 years' UK and European property industry experience. Highly renowned for his publications on Brexit, economic outlook, and property cycles, Walter has redefined how research can be used to support agency and professional services business development.

For more information, please email Walter.Boettcher@colliers.com.

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Walter Boettcher

Head of Research and Economics

Research and Forecasting

London - West End

I am the the Chief Economist at global property advisors Colliers International based in London.  I am a research economist identifying timely research topics and directing research and forecasting outputs.

I have over 20 years UK and European property industry experience and extensive expertise across a wide range of property sectors and related industries.

I participate regularly in industry panel discussions, but am focused more on direct client engagement with institutions, property companies, banks, and private investors. A regular media commentator, I have a wide range of national and broadcast experience.

I joined Colliers International in August 2007 after several years at a private property company where he was responsible for managing a mixed portfolio of London residential, retail and office assets.

Previously, I worked in a few London property advisory firms, a geodemographic company as well as a few youthful sojourns in the US offshore oil industry, local government and entertainment business.

I am an economics graduate of the University of Texas at Austin and received his PhD from the Faculty of Science at University College London.  I am a member of Lambda Alpha International and the Society of Property Researchers.

Perhaps best known for my alternative take on property economics and investment, I am a keen proponent of UK regional development and infrastructure investment.

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