Brexit has pushed the amount Brits are saving to the lowest level since records began – Business Insider
LONDON — A Brexit-fuelled economic slowdown is looking
increasingly likely, with more data out Friday suggesting UK
household finances are being squeezed to breaking point.
Brits are saving less than at any point in more than 50 years,
due to inflation and falling real wages.
According to new
figures released by the Office for National Statistics on Friday
morning, just 1.7% of incomes were put aside for a rainy day
in the first quarter of 2017, which is lower than at any point
since comparable records began in 1963.
The previous record low was set in the fourth quarter of 2016,
when Brits saved just 3.3% of their incomes. The amount being
saved has been falling rapidly in the post-crisis years, dropping
from more than 10% in 2010 to the current level.
The savings’ fall has accelerated since the vote to leave the EU,
with inflation surging to its highest level in four years, and
wage growth stuttering.
“The saving ratio has fallen again this quarter to a new record
low, partly as a result of higher tax payments reducing
disposable income. Some of the fall could be as a result of the
timing of those payments, but the underlying trend is for a
continued fall in the saving ratio,” Darren Morgan, the ONS’ head
of GDP, said in a statement.
Here’s the chart, courtesy of investment firm Hargreaves
As Tom McPhail, HL’s head of policy notes in a statement sent
after the news emerged: “This data is likely to set alarm bells
ringing; whether this is in fact evidence of a confident economy
or peak complacency remains to be seen. The fall in the household
savings ratio is undoubtedly in large part due to the squeeze on
disposable income caused by a combination of flat average
earnings and rising prices.”
This is worrying because, if the savings rate it falling because
of rising prices and flat wage growth, it suggests Brits have
little headroom to absorb further price rises. This could mean
that Brits cut back on their spending. Consumer confidence
figures out on Friday show
shoppers are at their most pessimistic for 12-months.
Any spending slowdown would be disastrous for the economy, as it
is consumer spending that has largely held up GDP growth since
last year’s Brexit vote.
Joe Staton, Head of Market Dynamics at GfK, the market research
firm that compiled Friday’s consumer confidence figures, said in
a statement: “The twin pressures of higher prices and sluggish
wage growth are squeezing household finances and adding to
widespread fears of a Brexit-induced economic slowdown.”
Separate figures from the ONS also released on Friday
confirmed the British economy growing at just 0.2% in the first
quarter, making Britain the slowest growing of the G7
countries in the period.
“Growth was driven by business services and construction,
partially offset by declines in some consumer-focused industries,
such as retail sales and accommodation,” the ONS said.