LONDON: Britain’s rock-bottom household savings problem, which has raised fears about unsustainable debt-fuelled spending, might not be quite so acute after all, according to the country’s statistics office.
Figures released earlier this year showed the household savings ratio — which measures how much money households have to save in relation to their income, after their spending — reached an all-time low of 1.7 per cent at the end of 2016.
But new official figures published on Friday raised the ratio in 2015 compared with previous estimates, meaning the fall in savings in the last couple of years might not have been quite as sharp as previously thought.
Spending by households is the main driver of Britain’s economy and the fall in the savings ratio, combined with a squeeze on spending power caused by rising inflation and slow wage growth since last year’s Brexit vote, has raised fears of a crunch for consumers.
The Office for National Statistics said the savings ratio in 2015 was now believed to be 9.3 per cent, up from a previously raised estimate of 8.4 per cent and much higher than 6.5 per cent logged in Britain’s official accounts.
The revision was made after the ONS received new data on dividends paid by self-employed workers to themselves for the period of 1997 to 2015.
Payments in 2015 were especially high because dividends were brought forward to beat a tax increase, but the methodology change suggested the fall in savings since then might have been less severe than thought, ONS statistician Katherine Kent said.
“This methodology represents an uplift, generally,” she said.
British consumer borrowing has been rising at about 10 per cent a year, raising concerns at the Bank of England about risks to banks and the broader economy.
It said in July it could force banks to hold more capital as an “insurance policy” to protect the wider economy in case the rapid growth in consumer credit turns sour.