THE HOUSEHOLD savings ratio has fallen to a record low in the UK, official figures have revealed.
Data from the Office for National Statistics shows the household savings rate – the percentage of disposable income being saved – fell from 3.3 per cent at the end of 2017 to 1.7 per cent in the first quarter of 2017, the lowest level since records began in the first quarter of 1963.
The decline was attributed to increased income taxes as well as increasing inflation and subdued wage growth.
Commenting on the figures, Tom McPhail, head of policy at Hargreaves Lansdown, said more needed to be done to foster a savings culture.
“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,” he said.
“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.
“Savings rates tend to fall when the economy prospers, and to rise in times of recession and uncertainty, as households cut back on consumption to build a rainy-day reserve. Monetary policy and the low returns available on cash may well be a factor here too.
“However we also know that only three in 10 of the working age population have savings of three months’ income or more and 12 million are not saving enough for retirement.
“We need to develop a stronger culture of saving and investing; this is something to which the government needs to devote more attention.”
The figures come after the Bank of England expressed concerns about a boom in consumer credit and increased the amount of capital that banks must set aside for losses.