The Lasting Impact of COVID-19 on Consumer Behaviour

‘Stay Home, Stay Safe.’

We are approaching five years since these very words were echoed across every household in the UK. The COVID-19 pandemic was one of the most disruptive global events of recent, fundamentally altering lives and reshaping economies in the process; its ramifications are etched firmly in modern history. Fast forward to today’s age, nations have embarked on a steady path of recovery, some coping better than others. The economic impact of COVID-19 is undeniable, yet what we tend to see more than anything is the macroeconomics behind it. Unemployment, inequality, and economic growth to name a few. Behavioural economics, on the other hand, has been heavily understated in comparison. This refers to how cognitive biases influence economic decision-making, providing a crucial lens to understand how economic agents have responded to uncertainty, crisis, and recovery. It ultimately poses the question – have the psychological effects of COVID-19 on consumer demand been longstanding or ceased over time? This article explores how behavioural economic principles such as loss aversion, herd behaviour, and status quo bias have induced a shift in consumption patterns and posed as an enduring psychological constraint since the onset of the pandemic.

Trends of Cognitive Bias Throughout the Pandemic:

One of the most prominent psychological tendencies seen throughout the pandemic was herd behaviour, which naturally ties in with social normalisation. Herd behaviour refers to economic agents making decisions partly based on the behaviour of others, hence imitating others’ actions rather than making independent decisions. This was evident when consumers flocked to supermarkets to ‘panic buy.’ As more and more media coverage over panic buying emerged in March 2020 particularly, this incentivised more households to follow suit in a chain reaction, driving shortages for goods such as toilet paper. The perception of scarcity, exacerbated by the detriment caused by the pandemic, fuelled irrational decision-making for households, thus causing a short-term change in consumption trends: stockpiling necessities was the latest craze. As the pandemic progressed, herd behaviour was engrained in more pervasive ways. For example, anti vaccination propaganda (such as links with miscarriages and low fertility) circulating across social media platforms compounded rates of vaccine hesitancies, making people less likely to take such vaccinations based on the decisions made by others. Ultimately, this highlights the dependence human minds have on others in times of crisis when making economic and social decisions. Another principle within behavioural economics established throughout the pandemic was loss aversion. Loss aversion is defined as an economic agent’s tendency to place greater importance on losses over gains of equal value. It can be boiled down into one simple scenario: would gaining £100 or losing £100 affect you more? The answer is likely the latter. Similarly, the pandemic subconsciously induced this cognitive bias. Devastating. Uncertainty. Unprecedented. These are the types of words that form the epitome of the peak of the pandemic. With this in mind, the fears over health, job security and consequently financial security overweighed any attempts to invest or make equivalent gains. Amid lingering economic uncertainty, even after economies readjusted, spending patterns remained cautious for an extended period. Loss aversion explains why certain industries, such as travel, hospitality, and entertainment, faced a delayed recovery. Consumers were hesitant to commit to wide scale spending due to concerns of similar outbreaks.

Cognitive Bias - Five Years On:

Whilst we can easily see how cognitive biases were seamlessly introduced during the COVID-19 crisis as a product of uncertainty (and perhaps a sense of confusion), the question remains whether this has changed or not in 2025. This article argues that the economic principle most enduring since COVID-19 is status quo bias, which continues to shape household decisions today. Status quo bias explains how economic agents tend to prefer to keep things the same, sticking with decisions made before rather than taking any other action. Between January and December 2019, around 1 in 10 (12%) of the UK workforce had worked at least one day from home in the previous week and around 1 in 20 (5%) reported working mainly from home. In 2024, as many firms have chosen to adopt a hybrid work model due to its relative convenience for workers since the pandemic, 27% of the workforce work at home for at least one day of the week. Similar trends can be shown in the rise of online shopping. Whilst online shopping had been a growing behaviour prior to 2020 (seasonally adjusted internet sales reaching 19.7%), the pandemic seems to have massively accelerated this trend. The proportion of sales made online increased to 27.0% in December. Using status quo bias, lockdown compelled individuals and businesses to sustain such adaptations initially adopted out of necessity, ultimately embedding them as the ‘new normal’ in their respective fields in the post-pandemic economy. Using Australia as an example, present bias during COVID-19 may also culminate in longer-term hindrances for households. Present bias, referring to the inclination to choose a short-term gain over a long-term reward, is primarily noticeable during times of emergency and desperation. During the COVID-19 pandemic, more than 2.6 million Australians withdrew up to $20,000 each from their superannuation fund without penalty under a government scheme. The consequence? Each early withdrawal of $20,000 cost a person roughly $120,000 in future retirement income in today’s terms. Every choice we make has a consequence. To an extent, though not entirely, the principle of loss aversion may have also continued to influence decisions made by households till today. Given the scale of the pandemic and the financial repercussions dealt with, many economic agents may be more reluctant to make decisions requiring riskier investments and excessive consumption, rather than prioritising savings. Again, 15 these cognitive restraints on spending behaviour would sit in the back of one’s mind, hence only partially applicable. If we tie into the first concept, as we move into 2025, this herding behaviour continues to curtail global recovery. Individuals still follow blindly trends in investment or consumer behaviour, as was emphasised in 2020, exacerbating stock market volatilities, misallocation of resources and economic inefficiencies. An example? The unprecedented surge in cryptocurrencies and specifically crypto art, is driven by rapid exposure to social media platforms. The persistence of this behaviour undermines economic stability and slows the pace of recovery, critical in materialising longer-term implications in financial markets.

A Foresight:

All in all, it is clear to observe how the COVID-19 pandemic painted a disorientated reality for all households, which only furthered irrational decision making. The uncertainty created by the pandemic would have stood as a daunting challenge for any economic agent to overcome, and its impacts are vivid. Whilst many advantages emerged through the means of both new and pre-existing implementations we still use today, COVID-19 is a timely reminder of the disruptive times we had to endure. To this day and beyond, whether we like it or not, the reality remains that COVID-19 has undeniably reshaped consumer behaviour, instilling a new and lasting dynamic in the field of behavioural economics.

*This article is also available to be read on the Econobethan magazine. Enjoy!