- Definition of Household savings ratio: The percentage of disposable income that is saved. (1)
- Total savings = Disposable income – Household consumption
UK Saving Ratio
- Latest UK household savings ratio: Q1 2017 = 1.7% (July 2017)
- By contrast the average savings ratio in the past 54 years is 9.2% of disposable income.
2017 has seen a dramatic fall in the UK savings ratio to a record low. This fall in the savings ratio has been caused by
- Fall in real wages
- Depreciation in Sterling post-Brexit – pushing up cost of living and contributing to fall in real wages
- To maintain spending, consumers have borrowed and dipped into savings
- Temporary factors (high tax payments on dividends)
UK Saving ratio. Source: National income accounts Q4 NRJS dataset
NRJS = Households + NPISH (Non Profit Institutions Serving Households)
Saving ratio and base interest rates
In theory, lower interest rates reduce the incentive to save. But, the interest rate is only one of many factors influencing decisions to save. The most important factor is the state of the economy. In 2009, we saw a rapid rise in the saving rate because of the recession – despite interest rates cut to zero.