Higher borrowing saw families through the renewed living standards squeeze but it can’t last forever

Published on Incomes and Inequality

Commenting on the latest Quarterly sector accounts published today (Friday) by the ONS, which revised down real household disposable income growth in 2017 from 0.3 per cent to -0.5 per cent, Torsten Bell, Director of the Resolution Foundation, said:

“Today’s figures show that the recent period of high inflation, and historically weak pay growth, caused a renewed living standards squeeze.

“The squeeze of the last two years is all the more worrying coming on the back of weak income growth before and after the financial crisis.

“Households have responded to shrinking pay packets and squeezed incomes by choosing to save less and borrow more. This makes sense as families cope with higher than expected price rises, but it’s not a sustainable one.”

The ONS figures also find that:

  • The household saving ratio fell 0.4 percentage points to 4.1 per cent in Quarter 1 2018 – the third-lowest quarterly saving ratio since records began in 1963.
  • The record-low household saving ratio in 2017 was revised downwards from 4.9 per cent to 4.1 per cent
  • Households’ net borrowing position in 2017 was revised upwards following downward revisions to wages and salaries of £10.6 billion over the course of the four quarters.