U.K. Households Have Comfortable Savings Margin to Handle Brexit

(Bloomberg) --

Fears that British consumers could be forced to slash their spending in a disruptive Brexit were partially allayed by new figures showing households are saving a larger proportion of their disposable income than previously thought.

The saving ratio rose to 6.8% between April and June, and averaged more than 6% over the previous four quarters -- two percentage points higher than last estimated.

Samuel Tombs at Pantheon Macroeconomics in London said the figures highlighted “the scope to absorb future income shocks without cutting spending.”

The latest GDP data Monday painted a generally positive picture of British households, which have kept the economy growing though the turmoil since the 2016 Brexit referendum. Consumer spending rose 0.4% in the second quarter as wage growth outstripped inflation, helping to offset another fall in business investment.

Revisions also reveal that households were net lenders over the past two years, receiving more income than they spent and invested. They were previously estimated to be net borrowers.

The ONS said the revisions largely reflected the fact that people have been donating less to charity than previously thought and receiving more money from renting their homes. Changes to the accounting treatment of student loans also mean less money is being lent to households by the government.

The economy is also starting to get support from the easing of austerity. Government spending rose at the fastest annual pace since 2008 in the last quarter, with higher spending in the National Health Service accounting for much of the increase.

To contact the reporter on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint, David Goodman

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