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Business Environment Profiles - United Kingdom

Household savings ratio

Published: 24 June 2025

Key Metrics

Household savings ratio

Total (2026)

11 Percentage

Annualized Growth 2021-26

-1.9 %

Definition of Household savings ratio

This report analyses the household savings ratio which measures the saving capacity of households and non-profit institutions serving households. It is measured as the percentage of disposable income put away for saving. The data is expressed as percentages averaged over each financial year.

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Recent Trends – Household savings ratio

The savings ratio is affected by interest rates and the income levels of households. IBISWorld estimates that the household savings ratio will reach 10.3% over 2024-25, 3.9 percentage points above its level in 2019-20. However, this upwards trend has been heavily dictated by a significant rise in the household savings ratio in 2020-21, as a result of the outbreak of COVID-19 (coronavirus).

For the first half of the five-year period through 2022-23, the household savings ratio followed a long-term downward trend that began in 2009-10. Persistently low interest rates and a recovering housing market had deterred consumers from saving and instead stimulated consumer demand for credit and mortgage debt. Between 2015-16 and 2019-20, generally speaking, economic conditions in the United Kingdom had improved steadily. This is exemplified through rising levels of real disposable income, record low unemployment and changes in the tax-free allowance in relation to ISAs the household saving ratio. During these years, the UK's household saving ratio had fallen from 9.3% in 2015-16, to 5.3% during 2019-20.

However, the household savings ratio surged to 16.9% over the year through 2020-21, as a result of the significant economic disruption caused by the coronavirus pandemic. The coronavirus pandemic led to the disruption to stock markets, commodity markets, consumer demand and business activity, which combined to result in a global economic slowdown. Furthermore, the coronavirus outbreak also led to nationwide containment efforts which has resulted in people working from home or self-isolation across the United Kingdom and the world. The pandemic had the dual effect of both diminishing consumer confidence and limiting consumers ability to spending on retail, leisure and transport sectors, among others. Both these factors contributed to the rise in household savings over the year through 2020-21.

In response the government and Bank of England sought to stimulate the economy to encourage spending. After initially cutting interest rates to historic lows of 0.25% on 11 March 2020, the Bank of England cut rates again just eight days later to a new record low of 0.1% in efforts to stimulate spending. In addition to this, the UK government introduced a number of stimulatory measures intended to give a shot in the arm to the economy amidst prevalent disruption. In the Budget 2020, the government committed to the biggest rise in public borrowing for 30 years and an end to a decade of Conservative austerity, with public sector net investment set to rise from close to 2% of national income, to 3%. Furthermore, the Coronavirus Business Interruption Loan Scheme (CBILS) was introduced, which provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the coronavirus outbreak. Finally, the UK government also introduced the Coronavirus Job Retention Scheme on 20 March 2020, which provides grants to employers to pay 80% of a staff wage each month, up to a total of £2,500 per person per month.

While the Bank of England responded to outbreak with an emergency cut to the official bank rate, taking borrowing costs back down to the lowest level in history and the government introduced an array of supportive measures such as those listed above, these were not enough to override the drastic damage set to be caused by the underlying effects of coronavirus. This is due to the drastic falls in the global economic outlook and consumer and business confidence throughout the economy, coupled with people's heightened concern regarding employment prospects and their respective financial stability. As a result of these factors, the household raving ratio increased significantly during 2020-21. However, the UK's household savings ratio fell by 9.3 percentage points during 2021-22, to reach 7.6%, as the coronavirus related pressures bean to ease, improving consumers ability to spend for the remainder of the year. This was facilitated through the reopening of the domestic and global economy, which has been made possible through the reduction in severe coronavirus cases and deaths through the rollout of the COVID-19 vaccines.

Over the current year, this trend is expected to continue with IBISWorld estimating that the household savings ratio will fall by 1.3 percentage points in 2022-23. This fall in the savings ratio is primarily due to the cost of living crisis over the current year. On the morning of 24 February 2022, President Vladimir Putin announced that Russia was initiating a "special military operation" in the Donbas region, and proceeded to launch a full-scale invasion into Ukraine. This then led to various economic and diplomatic sanctions from Western countries, including the UK, towards Russia. These sanctions have been met with threats from Russia and orders my President Putin to place Russian nuclear deterrent forces on high alert. While the global and domestic economic outcome of the Russian-Ukrainian war is uncertain at this stage, it is evident that this will be an influential variable towards the UK's household savings ratio. This is because households will be indirectly affected by the war and subsequently the economic sanctions, whether it be energy and consumer goods price rises, trade disruption, interest rate hikes and stock price volatility. In addition to the conflict within Ukraine, the UK economy is currently facing surging inflation, falling real disposable income, supply chain constraints and rising interest rates in order to combat inflation. The UK economy is now projected to enter recession from the fourth quarter of 2022. The UK economy is expected to contend with rising inflation, supply chain difficulties, energy price surges and dampened business confidence, exacerbated by Russia's invasion of Ukraine. The United Kingdom's annual inflation reached a four-decade high of 10.1% in July 2022 amid rising food and energy prices, the highest among G7 economies. In response to rising inflation, the BoE raised the official bank rate to 0.25%, 0.5%, 0.75%, 1.25% and 1.75% respectively in December 2021, February 2022, March 2022, June 2022 and August 2022. With significant macroeconomic uncertainties and the surging cost of living, inclusive of energy and food prices, coupled with falling real wages due to significaint inflation, the household savings ratio is expected to fall over the current year.

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5-Year Outlook – Household savings ratio

Over the five-year period through 2029-30, IBISWorld forecasts that the household savings ratio i...

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