Savings And Disposable Incomes Are Dropping Across The UK
In this post we take a surface view look at the way in which savings and disposable incomes are dropping across the UK and what that could mean for us all.
It’s always difficult having to report stuff like this, but it’s become clear that UK households are feeling the pinch more than ever – with a downward trend of both savings and disposable income being seen towards the end of 2016 by the Office of National Statistics.
Figures in the ONS survey showed households had been saving just 3.3% of their income, using a saving ratio which calculates what households are able to save out of their disposable income. The figures came as a shock mostly because they were the lowest seen since records began in 1963.
The issues behind this drop in savings and disposable income are seeing people struggling on two fronts. The first is more domestic and easier to understand – food, fuel and goods prices are rising across the board. It’s just getting that bit more difficult to save money. You may have seen shops bringing up prices and be paying more at the pump as a result.
Of course, the price of fuel and bread going up also pushes up inflation, which hit a 2.3% record high in February. But why are these goods going up so sharply?
As the pound drops in value it become much more expensive to import fuel, and of course the pound has dropped massively following the government’s decision to hold an EU referendum and the subsequent decision to leave. This has also affected luxury and technology goods and several high end companies which import and sell products have also announced UK prices will go up as a result.
Consumers are also facing a second threat to their savings – a rapid growth in consumer credit has seen banks recently applying tighter credit scoring criteria for credit card applications and unsecured personal loans. While it does stop the banks from failing, this means that people are faced with more difficulties in obtaining credit cards and overdraft facilities, forcing households to dip into their savings.
With much of UK economic growth driven by consumer spending, it’s clear to see that people’s disposable income is a key factor in keeping it afloat. While it is growing in small amounts, usually below 1%, we could be heading for further difficulties or even recession if the pound further destabilises and credit becomes harder to get.
Coupled with increasing housing prices, rising council taxes and people unable to afford mortgages staying in rental, this is indeed a worrying time for our disposable income, our spending power, and the economy.
If you’re having money troubles, head over to The Money Advice Service for free and impartial no-frills guides to sorting out your finances.