Household savings ratio increases to 5.6%

by Gill Montia

Story link: Household savings ratio increases to 5.6%

Britons have heightened their capacity to save in response to the credit crisis and recession and are putting away a larger proportion of income.

Official figures have revealed that the UK’s savings ratio increased to 5.6% in the second quarter of 2009, up from 3.9% in the three months to the end of March.

While there is still some way to go to beat the 12% peak seen in the 1990s, the ratio actually visited negative territory only last year.

The indicator is worked out by the Office for National Statistics and expresses household saving as a percentage of total resources.

However, economists are wary of the turnaround as recovery from the recession is dependent on consumer spending.

The UK’s building societies are certainly not benefiting from the savings revival as their combined balances decreased by £202 million in August 2009, compared to an increase of £995 million a year earlier.

The director general of the Building Societies Association, Adrian Coles, blames a very low base rate “and the difficulties faced by many households, with job losses rising and income growth subdued”.