The COVID-19 outbreak has shown just how suddenly circumstances can change, and for many people has underlined the importance of being as financially prepared as possible. With the threat of further financial challenges and even returning social distancing measures, it is therefore perhaps little surprise to see that nearly half of all adults say that building an emergency savings pot is a priority now/within the next two years, while a further 28% say that this will be a priority in the future.

The impact of the COVID-19 outbreak – both societally and economically – has been seismic, and consumers have reacted by adopting something of a bunker mentality – with those able to save money doing so, helped by the reduced opportunity to spend. This refocused many people on the importance of saving with financial preparedness becoming a higher priority for consumers as they looked to be ready for further disruption.

However, the reality is that the economic downturn will have a lasting impact for many consumers and in particular the young. While arguably already disadvantaged by the soaring cost of living in recent years, many young adults now face substantial further setbacks in their journey to traditional financial lifestages, which will undermine their engagement with a number of important financial services products.

However, it is not all doom and gloom, and with many people finding an opportunity to build their savings pots or even start saving for the first time over the last 18 months, there are now openings for financial services providers to offer greater advice with respect to financial planning. In particular, providers can focus on helping people to maintain and grow their savings, with more sophisticated monitoring tools likely to help keep them engaged.

Key issues covered in this Report

  • The impact of COVID-19 on consumer spending and savings habits.

  • Consumers’ top lifestyle priorities.

  • Lifestyle changes people have experienced in the last year and their expectations for the next two years.

  • Financial priorities in the near- and longer-term future.

  • Factors consumers consider most important to financial happiness.

  • Consumer attitudes towards financial planning.

COVID-19: market context

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March, and with a hoped end to all restrictions by 21 June, although the growth of the Delta variant means this final lifting of restrictions was delayed until 19 July. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

Even before the full re-opening of the economy, retail sales and Mintel’s own household finances tracker provided encouraging signs of a rapid return to consumer confidence, and a willingness to spend at least some of the savings that many households were able to build up over lockdown period. Even the rapidly rising case numbers across the UK in June and July did not seem to have significantly dented this confidence.

The UK’s vaccination programme started on 8 December 2020. As of 20 July, 88% of the UK population had received their first dose of the vaccine and 69% had received their second dose.

Economic and other assumptions

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook Report, but also take into account predictions made by other economic forecasts, including the Bank of England.

After the fall of 9.8% over the course of 2020, the OBR’s scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022. GDP isn’t expected to return to pre-COVID-19 levels until the second quarter of 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster than expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in the fourth quarter of 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

The rapid vaccine rollout and the continued efficacy of the vaccine, however, means that more recent economic forecasts have been significantly more optimistic than the OBR’s March forecast, even given the rise of the Delta variant. We have factored this rise in optimism into our market analysis and scenario forecasts.

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