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Ex-BoE economist: Post-COVID spending boom is 'implausible'

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·Senior City Correspondent, Yahoo Finance UK
·2-min read
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Charlie Bean, deputy governor of the Bank of England, during a consultation on plans to issue plastic bank notes within the next three years.
Charlie Bean, pictured when he was a deputy governor at the Bank of England. Photo: PA

The chair of the UK government's spending watchdog and a former chief economist at the Bank of England has poured cold water on hopes of a consumer spending boom once lockdown ends.

Sir Charlie Bean, chair of the Office for Budget Responsibility (OBR), said forecasts of a boom in consumer spending were "implausible." The comments represent a break with Andy Haldane, Bean's successor as chief economist at the Bank of England.

A combination of furlough support and declining costs during lockdown have helped Brits build up a huge amount of savings during the COVID-19 pandemic. Consumers have built up a nest egg worth £160bn in aggregate, according to Bank of England estimates. £18.5bn was saved in January alone.

READ MORE: Brits saved another £18.5bn in January

The savings glut has fuelled hopes of a consumer-driven economic rebound once restrictions ease. Last month, the Bank of England's chief economist Andy Haldane said there was an "enormous amounts of pent-up financial energy waiting to be released, like a coiled spring." He predicted that consumer spending would rebound like "a light-switch being flicked rather than a dimmer-switch being turned" once conditions normalise.

Bean, who was chief economist at the Bank of England from 2000 until 2008, predicted a much slower rundown in savings.

"I find implausible," Bean told the Treasury Select Committee on Monday. "It’s much more plausible it’ll be spread out over several years."

READ MORE: Bank of England economist says UK 'like a coiled spring'

Bean said that a spike in spending on "durable goods" like cars was likely post-lockdown, given evidence that consumers had put off large purchases during the pandemic. An uptick in spending on white goods appliances such as fridges and washing machines was also likely due to buoyant activity in the housing market.

However, the bulk of the billions in savings account would only filter through to the economy gradually, Bean said.

His comments came during an evidence session to discuss the OBR's response to last week's budget.

WATCH: What is a budget deficit and why does it matter?

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