How Britain’s saving stalled: Wages are rising and borrowing is down but savings ratio remains near record low
- The percentage of disposable income saved rose to 4.5% in December 2018
- This is the highest since the fourth quarter of 2016
- Borrowing also decreased as a share of GDP – but the Office for National Statistics found households have been net borrowers for more than two years
- It called it ‘unprecedented’ – but one expert said it’s more to do with building houses than Britons overusing credit cards
A £2.5billion increase in wages saw saving edge up at the end of last year, but the percentage of their income Britons are salting away remains at historic lows.
The household saving ratio – the percentage of disposable income being saved – inched up 0.4 per cent to 4.5 per cent in the fourth quarter of last year, data from the Office for National Statistics shows.
That is the highest savings level since the final three months of 2016, when households squirrelled away 4.6 per cent of disposable income.
But even with that improvement, the ratio of 4.5 per cent is still the join ninth-lowest since records began in 1963.
A ratio of 4.5% being saved in the final three months of 2018 makes the current percentage households are saving the ninth-lowest since records began in 1963
A previous report from the country’s official statistician found that the amount households were saving in the 2017-18 financial year was the lowest it had ever been.
On top of this, while borrowing decreased to 0.8 per cent of GDP in the final quarter of 2018, down from 1.4 per cent in the previous three months, the ONS report found that it was still the ninth consecutive quarter of households being net borrowers.
This would mean households either have to dip into their savings or put themselves into debt in order to fund their day-to-day spending.
The statistician called the fact households had been in the red for more than two years now ‘unprecedented.’
A landmark report by the Trades Union Congress in January 2019 found that households were each more than £15,000 in debt, excluding mortgages.
Their calculation was based on adding together the total amounts owed by people in the UK in bank overdrafts, personal loans, store cards, payday loans, credit cards and student loans.
While households are saving the highest percentage of their income since 2016, the rate still remains historically low according to data from the Office for National Statistics
There was better news for savers though as real household disposable income after tax ticked up by 1% in the fourth quarter of 2018. This is the highest growth in RHDI since June 2017
However, the growth in household spending over the last three months of 0.3 per cent – which helped keep households in the red – was driven primarily by investment in housing, which grew 0.6 per cent over the previous quarter.
In better news for savers, the ONS statistics found that real disposable income after tax grew by one per cent in the fourth quarter of 2018, the fastest it had climbed since between April and June 2017.
THIS IS MONEY’S FIVE OF THE BEST SAVINGS DEALS