As Philip Hammond significantly reduced Britain’s economic growth forecast in his Spring Statement, new figures reveal households are starting to save rather than spend.
The economic uncertainty caused by Brexit is filtering through to consumers who are now preparing for a downturn in the economy by investing in competitive savings products.
Ricky Knox, CEO of Tandem Bank, says, “Mr Hammond might have tried to divert attention away from Britain’s sluggish economic growth with talk of a budget surplus, but investors are clearly worried about a post-Brexit future and are already diverting their wages away from the economy. ”
With employment rates at a record high of 75.8 % and government borrowing now £3 billion lower than previously forecast at the Autumn Budget, the Chancellor was keen to focus on a predicted reduction in the country’s overall debt in the Spring Statement.
Philip Hammond acknowledged that leaving the EU without a deal would deliver a ‘significant short-to-medium term hit to the UK economy’. Investors are clearly picking up on these concerns and bracing themselves for a post-Brexit slump. The reduction in the OBR’s economic growth forecast from 1.6 % to 1.2% will only serve to bolster concerns.
Ricky Knox, CEO of Tandem, says, “With a ‘no-deal’ Brexit still on the table and a reduction in economic growth forecasts it’s unlikely that uncertainty felt by consumers and investors over our economy will go away any time soon. Although consumers have shown resilience no-one will be surprised if we see a squeeze on spending soon.”
Figures from Tandem reveal a sharp rise in the number of new savings accounts opened since the start of the year. The average savings balance increased by 4% in January and 18% in February, while average spending per customer is certainly slowing down with a 2% drop in January followed by a further 8% drop in. In fact, spending has been steadily falling over the last 6 months from an average £963 on credit cards in August 2018 down to £713 in February 2019.
In an effort to capitalise on the current rate freeze savers are choosing to lock money away with banks offering competitive rates of interest. No matter how optimistic the Chancellor is about reductions in the National Debt, savers know this may be their last chance before a potential post-Brexit rate drop. However, after the previous rate rise, some high street banks failed to pass on the rate to their savings customers. When looking for the best deal it is important to find an account that reflects the current interest rate.
Ricky Knox, adds, “The economy needs a boost from continued consumer spending, but savers are looking to capitalise on the current rates on offer from banks and it’s not a bad time for them to hedge their bets.”
Tandem has its customers interest at the heart of everything they do, especially as they plan for times of economic uncertainty. The bank’s fixed-term savers offer market leading rates that far exceed the current Bank Rate and it operates a unique business model where it only looks to benefit when its customers do. Whether you take out a credit card, a savings account, or switch bills, Tandem wins when you do.