Brits save for rainy day despite seeing incomes rise
According to the latest report from the Office for National Statistics, real household income per head rose 1.6% in that period, reaching its highest level in 18 months.
Despite this increase, households are still clamping down on spending, with real household spending going down £7 per head in the same period.
This means that household savings rose by 0.7% to 6.7% of income. Gross household saving was £18.2bn in the second quarter, up from £16.0bn in the first quarter of 2012.
Phillip Bray, an independent financial adviser from Investment Sense, said: “The hair shirt could soon be declared national dress.
!Britons may have got richer in Q2, but we didn’t feel it – and we certainly didn’t spend like it.
“Income crept up, but we spent less. Instead households are saving hard – with the savings ratio creeping back up towards levels not seen since the depths of the recession in 2009.”
Households are trying to pay down debt, save money and to find a secure financial footing as consumer confidence remains pessimistic.
Bray continued: “Even though deposit account interest rates are falling, many people are still piling their cash into savings accounts that pay meagre levels of interest rather than take the risk of spending it.
“There can be few more persuasive illustrations of the weakness of UK consumer confidence.
“But people’s desire to save for a rainy day is doing nothing to help the wider economy. There’s a danger that such reluctance to spend could become a self-fulfilling prophecy – and the economy may grind to a halt as a result.”
Bray added that in a bid to save for a rainy day, Brits wishing to save as much as possible, could potentially negatively affect their retirement pots – as some may be tempted to cut back on making pension provisions for the short term.