British households drew down on their savings for an eighth straight month in the run-up to Christmas, as falling real incomes make it increasingly difficult for consumers to maintain their spending habits.
UK consumer spending figures have held up relatively well despite the surge in inflation that followed 2016’s Brexit vote, but data released by UK Finance on Thursday highlight the impact that falling real wages is having on households.
The amount held in tax-free Individual Savings Accounts accounts at the UK’s largest high street banks shrank by £669m in December, extending a long run of declines. Households have saved more than they withdrew from such accounts in just two of the last 20 months.
Total deposits across different types of bank account, including ISAs, grew just 2.1 per cent in the 12 months to December, the same rate as November and close to the eight-year low hit in October.
As well as spending a higher proportion of their incomes, consumers also continued to fund large amounts of spending through unsecured borrowing. Annual growth in outstanding credit card debt was 5.3 per cent, the same level as the previous month.
However, annual growth in overall consumer credit did decline to 0.7 per cent, down sharply from the start of 2017.
EY Item Club’s Howard Archer said the trend would be welcomed by the Bank of England, which has warned about excessive lending growth.
Mr Archer said “lenders have been reining in the amount of unsecured credit available to consumers and tightening their lending standards”, while “heightened uncertainties over the outlook and icnreased concerns over personal finances are necouraging some consumers to be more cautious in their borrowing”.