UK households and businesses build up cash in the form of lock-in bites

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UK households and businesses accumulated cash in March as the coronavirus lockout started to bite, as the Bank of England reported a record increase in the amount of money held in bank and loan accounts large companies.

Sterling silver holdings of private sector businesses and households increased by £ 57.4 billion in March, the largest increase on record and well above the nine-month average of £ 9 billion , announced the BoE on Friday. Borrowings in pounds sterling from banks increased by £ 55.3 billion, also a record amount, against an average of £ 5.1 billion over six months.

Samuel Tombs of Pantheon Macroeconomics said the data showed that “demand for cash has surged. . . as businesses and households pulled down the hatches, “businesses seeking to improve liquidity and households cutting non-essential spending.

Businesses borrowed an additional £ 34.1 billion in March, also a record increase, according to the BoE, reflected in a £ 34 billion increase in business deposits with banks. Debt growth is almost entirely due to a large increase in corporate borrowing, which increased 11.8% month-on-month, compared to an increase of only 1.2% for small and medium-sized businesses.

The figures reflect the initial impact of the foreclosure on corporate liquidity, but would not reflect the business support provided through the BoE and the Treasury’s liquidity and loan operations, said Tombs. Next month’s data would be a better guide to whether companies are doing well, he added.

Meanwhile, households repaid £ 3.8 billion of consumer credit in March – the largest net repayment ever, with £ 2.4 billion of credit card debt repaid and $ 1.5 billion. pounds sterling other loans.

The BoE said that this net repayment was largely due to a sharp drop in new borrowing, partially offset by slightly lower repayments.

These figures therefore reflect the collapse in aggregate consumer demand, as foreclosure measures have shut down much of the economy, with consumers being forced to stop spending in many areas, whether or not they were trying to save. Howard Archer, economic advisor to the EY Item Club, noted that an important factor would be the drop in sales of new cars.

With the housing market frozen since mid-March, BoE data also showed a sharp drop in mortgage approvals for home purchases, their lowest level since March 2013, at 56,200 for the month of March.

However, BoE data does not reveal how many households may be in financial difficulty or go into debt as a result of job losses and lower wages.

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A survey published Friday by Citizens Advice suggests that more than 10 million people have already missed payments on essential bills – rent, tourist tax or telecommunications bills – that could leave them open to eviction, to action. bailiff or a loss of essential services, when the protections put in place for the duration of the lockout end.

Separate data released on Friday confirmed the scale of the manufacturing collapse in the UK, with the final result of the April purchasing managers index produced by Markit, the research group and the Chartered Institute of Procurement and Supply, according to last week’s flash reading. .

The index fell from 47.8 in March to 32.6 in April, with a record proportion of companies reporting a contraction in orders, production and employment, and the only pockets of growth observed in companies manufacturing medical equipment or food products.

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