The share of income UK households save was at its lowest in 2017 since records began, as expenditure outstripped inflation-eroded pay over the 12 months. There have been concerns from regulators and campaign groups about the extent to which households have been dipping into savings and increasing debt in order to make ends meet.
“Household spending power has been flatlining for the last two years. That has forced consumers to run down savings and borrow more just to sustain sluggish growth in spending,” said Ian Stewart, an economist at Deloitte.
The Office for National Statistics reported that the full-year household “saving ratio” fell to just 4.9 per cent in the year, down from 7 per cent in 2016 – and the lowest annual reading since 1963. The total household debt-to-income ratio in 2017 stood at 133 per cent in 2017, according to the ONS. The ratio fell steadily in the wake of the financial crisis, after peaking at 150 per cent in 2007, but has been rising again since 2015.
Total incomes grew by 3.5 per cent, while expenditure was up 3 per cent. Inflation spiked to above 3 per cent in 2017, mainly due to the slump in the value of sterling in the wake of the June 2016 Brexit vote. Average real wages began falling in April, although there are indications that pay growth is now rising above the cost of living again.
The annual growth rate of unsecured consumer credit ticked up again to 9.4 per cent in February. Within this, credit card borrowing rose 9.6 per cent.
The ONS also noted that the UK was the only G7 country to see a slowdown in its annual GDP growth rate in 2017, suggesting Britain is benefiting less from the synchronised global economic pick-up than others. Full-year UK GDP growth was 1.8 per cent, the lowest since 2012.
“The recent performance of net trade remains worse than all other big depreciations of sterling in the post-war period,” said Samuel Tombs of Pantheon Macroeconomics.
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