Savers and consumers, in general, are struggling at the moment and new GDP figures from the OECD have revealed just how dire the situation has become. Last week, the organisation revealed that in the second quarter of 2020, GDP fell in the UK by 20.4 percent.
Families in the UK are likely already feeling the coronavirus pinch but some experts are warning that given the dramatic fall in GDP, more pain may be on the way.
James Robson, the CEO and Co-Founder at FundOnion, commented on the dire figures: “As demonstrated by the OECD’s figures last week; we can now start to see a clearer picture of the impact of the COVID-19 lockdown on the finances of UK households.
“What is palpable even now is that the full impact on consumers and their finances has not been realised yet.
“As the UK government looks to ease lockdown restrictions and to pull back support from employee furlough and CBILS/BBLS, the full impact of COVID-19 will begin to be felt by households’ personal savings being put under pressure, and the outlook for mortgages becoming much more expensive.”
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This sentiment was also shared by Jason Bolton, a Director & Chartered Financial Planner at Beaufort Financial.
Jason detailed that given the low interest rate environment the UK is currently in, savers are unlikely to weather the effects of the poor GDP numbers.
As Jason explained: “The pain is set to continue for savers, with the outlook for interest rates being lower for longer.
“As it stands, the most effective interest rate for cash on deposit is a paltry 1.29 percent, whilst CPI is currently running at 2.3 percent.
“This means their ‘spending power’ is falling.
“Though it can be reassuring if your savings balance isn’t dropping, that feeling can soon be lost when you need to dip into your savings for goods and services that have become more expensive.”
He went on to analyse how this may affect pension assets in particular as well as provide advice for those unsure of what to do: “For pensions, markets took a battering in the early days of the pandemic and fund values would have been on the receiving end of the same treatment.
“While the recent recovery in markets has been reflected in these values, savers should remain vigilant and make sure their underlying investments are in line with their current appetite for risk and capacity for loss.
“For those unsure about the ongoing impact on their savings and how they will meet their future income needs, it might be worth seeking help from an independent financial adviser, who can look into this on your behalf.”
It should be noted that the data released from OECD may face revisions in the coming weeks and months.
Coronavirus appears to impact all areas of economic life, with the OECD noting that as a consequence of measures put in place by governments to reduce the spread of the disease, many statistical agencies are facing unprecedented collection, compilation and methodological challenges to develop indicators across a number of domains.
To address this, the “statistical community” is developing guidance and systems to ensure that statistics of this nature remain reliable but, inevitably, the OECD warned that there will be impacts on quality, meaning that larger and more frequent revisions will likely be needed.