Spending spree short and sweet

People hold on to their windfall shares r Volatile week ahead for equities r Increase in firms in `intensive care'

Less than a quarter of the pounds 30bn of windfalls from converting building societies will be spent, according to a survey of the mutuals' former members. The research, published today by investment bank Robert Fleming, forecasts a boom in spending on home improvements, holidays and electrical goods, but expects the spending surge to be short-lived.

Though more than pounds 8bn of the total windfall payouts will be injected into the domestic economy, Fleming's research shows that the high import content of this expenditure will dilute the effect on Britain's GDP to 0.5 per cent this year.

Robert Fleming's economic adviser, Peter Warburton, says that with the surge in consumer confidence over the past six months expected to be reversed in the autumn there is no need to push interest rates higher to fend off a feared high street boom: "We found only a small minority of the respondents whose new-found spending confidence will continue at the expense of saving. The surge in consumer confidence is likely to be reversed quite rapidly this autumn."

The findings of the report echo comments from the Bank of England in which it suggested the four quarter-point interest rate rises in as many months would be enough to keep inflation on track to meet its 2.5 per cent target.

The Bank last week announced plans for its own investigation into the economic effects of the windfall factor.

Mr Warburton said: "The comparison with 1988, when real wages rose strongly and home-owners borrowed to excess, is poorly made. On the basis of the survey evidence, there is no case for hitting the consumer with further interest rate increases."

The survey is one of the first to attempt to pinpoint what former building society members have done with the windfalls that gave investors and borrowers an average of more than pounds 2,000 each in shares. Fleming calculated that the flotations of Halifax, Alliance & Leicester, Woolwich and Norwich Union, and those such as Northern Rock that were still to come, would release a total of pounds 8.2bn of spending power. Of that, pounds 2.1bn would be spent on home improvements, furnishings and DIY, pounds 2.1bn on holidays and travel and pounds 700m on electrical items for the home.

The detailed breakdown of the survey by age and social class revealed interesting differences in spending patterns. A fifth of young ABC1 professionals between the ages of 15 and 34 spent most of their windfalls on a car or motorbike, a much greater proportion than older people in the same social class.

A quarter of young C2DEs chose to spend their cash on electrical items. There was hardly any preference among ABC1s for electrical goods.

Middle-aged and older people from professional and managerial classes were more likely to use their windfalls to travel.

More than three quarters of windfall shares have been saved or used to repay debt. The high savings rate is expected to inject pounds 4bn of new business into the PEP and unit trust industry, but most of the new PEP accounts will be with the converting institutions themselves. Banks and building societies are expected to receive up to a further pounds 4bn of cash inflows.

A separate Harris poll of 168 MPs showed three quarters were in favour of maintaining the mutual status of building societies and life companies. The report was commissioned by NPI, the pensions and investment management group.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Life and Style
tech
News
The 67P/CG comet as seen from the Philae lander
scienceThe most important scientific breakthroughs of 2014
Arts and Entertainment
Ian McKellen as Gandalf in The Hobbit: The Battle Of The Five Armies
film
Arts and Entertainment
Sarah Koenig, creator of popular podcast Serial, which is to be broadcast by the BBC
tvReview: The secret to the programme's success is that it allows its audience to play detective
News
Ruby Wax has previously written about her mental health problems in her book Sane New World
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas