LONDON: British households increased their savings sharply in early 2021 as a return to lockdowns prevented them from visiting bars, restaurants and many shops, potentially boosting their spending power for the economic recovery now under way.

The country’s savings rate, which measures the income households save as a proportion of disposable income, rose to 19.9% from 16.1% in the fourth quarter of 2020, the Office for National Statistics said on Wednesday.

That was the second-highest savings rate on record after a leap to 25.9% in April-June last year during the first round of coronavirus lockdowns.

Paul Dales, an economist with Capital Economics, said the stock of excess savings was bigger than he had expected.

“This represents a larger upside risk to the pace and duration of the economic recovery further ahead should households choose to spend it,” he said.

The data also showed Britain’s economy shrank a bit more than previously thought in the first quarter as gross domestic product contracted by 1.6%. The ONS had previously estimated GDP shrank by 1.5%.

Household spending was weaker than first estimated.

However, the hit to GDP in early 2021 was just a fraction of the roughly 20% slump in the second quarter of 2020 when Britain was in its first lockdown.