7th August 2014
UK households have fallen behind other European households when it comes to the amount they could be saving each year – slipping behind both Spain and Italy and only just ahead of Portugal, according to the Post Office’s Future of Savings Study.
The UK currently sits eleventh in a league table of average potential household savings across advanced economies.
The study, conducted alongside the Centre for Economics and Business Research, examined the savings habits of 18 countries with a comparable cost of living** and found that since 2010, the average amount each UK household could potentially save each year has fallen by more than 10 per cent to £3,781.
This is almost £5,000 less than Australia, which has the most money available to save, and £3,286 less than the highest placed European country, Switzerland.
Should this trend continue, Post Office Savings predicts that by 2018 this amount will have fallen to as little as £3,000 and will place the UK below the majority of advanced European economies in the savings league table.
Worryingly, this makes UK households far more vulnerable to economic shocks, such as a repeat downturn, redundancy or wage cuts.
What do other developed households save?
While the economies of Spain and Italy are still struggling in comparison to the UK, the average potential household savings for each country exceeds that of UK households, £4,644 and £5,409 respectively in 2013. Of all countries analysed, Estonian households had the smallest amount of money available to save each year, with only £1,039. However, the US fares worse than the UK, with a pot of only £3,442.
When it comes to trends, nearly all households – regardless of country – experienced a peak in potential savings in 2012, with many still keeping a close eye on their finances.
However, this changed in 2013, with the majority of households’ potential savings pots falling again – the exception to the rule being Australia. Australian households managed to buck the trend and found themselves in the enviable position of being able to save more, with money available to save, or potential savings, growing from £8,517 in 2012 to £8,746 in 2013.
Post Office head of savings Henk van Hulle says: “While it’s great UK households feel more confident about their finances, it’s worrying that we’re seeing savings rates fall so soon after a recession. While spending is undoubtedly good for the UK economy, it’s not good for savers to neglect their pots and leave themselves vulnerable to a change in circumstance or wider economic shock.
“It’s all too easy to forget about the importance of savings, or fall into the trap of thinking it’s not worth it, because you don’t have much to save. However, saving a little and often, and within your means, can make a big difference, especially with the cost of living continuing to rise. And for us to create a long-term, sustained economic recovery, a strong savings culture is key.”
Figure 1: Average (mean) household potential saving per annum, £
Source: Eurostat, OECD, World Bank, Cebr analysis